The Effects of Consumption, Production and Temporal Migration on Global Markets

This article focuses on what we see and what we don’t see, how politics becomes the central focus   of the failing economy although it is the not its underlying cause and how we as consumers play the primary role of economic recovery. When economists do not understand the behavior and   temporal role of consumers, they risk prescribing the wrong cure for the new norm in mature economies of slow-growth GDP and fewer jobs.

Read the full article here: Temporal Migration pdf

Special thanks to Roger Blackwell for his contribution and collaboration with me on this work.

Yes Virginia, the Ham Is Chinese (Part 4)

The emerging middle class in China represents enormous opportunity not only for Smithfield but also for many American companies.  For companies like General Motors, Procter & Gamble, Yum Brands, and Caterpillar, China is where the growth is. Coca Cola has described China as “the commercial opportunity of the 21st century”.  In 2013, KFC, McDonald’s, and Starbucks will reportedly each open one new restaurant every day in China. But, such market expansion must be a two-way street.  For more American firms to be able to have access to the Chinese marketplace, Chinese firms must be allowed and encouraged to compete in the United States.

Previous investment attempts by Chinese companies have not always gone smoothly. A big obstacle has been that many deals have touched on  national security sensitivity.  The Committee on Foreign Investment in the United States (CFIUS), is a U.S. inter-agency government panel that reviews foreign deals for national security issues.  In 2005, Cnooc tried to buy Unocal but ran into insurmountable U.S. political opposition and retreated from the deal.  In 2011, China’s Huawei had attempted to acquire the U.S. technology company 3Leaf Systems but withdrew after CFIUS stipulated restrictions. In 2012, a CFIUS review of an acquisition of Oregon wind farms by Ralls Corp, owned in turn by executives of the Chinese Sany Group, collapsed, since some wind farm properties were located near a sensitive U.S. naval facility. Even the Cnooc acquisition of Canada’s Nexen had to accommodate concerns raised by CFIUS over U.S. operations.

While Chinese deals for energy, technology, and infrastructure businesses are likely to draw serious scrutiny by CFIUS, consumer goods businesses are a different matter.  These deals will be far less sensitive.

For our and their investment benefit, Chinese companies should focus on companies that are heavily dependent on consumer choice and preference like Smithfield.  Will American customers continue to prefer these brands after a foreign acquisition?  If the brands continue to pursue the marketing discipline of providing great value and pleasure, the answer is likely to be a resounding “yes”.

This article is the final part of a series written by Michael Czinkota and Charles Skuba. Read part 3 here.  Guest writer Charles Skuba teaches international business and marketing at Georgetown University. He served in the George W. Bush Administration in trade policy positions in the U.S. Department of Commerce.

Yes Virginia, the Ham Is Chinese (Part 2)

The result is economic growth at double digit levels for several decades and a rapidly expanding middle class.  This success has also led to new economic challenges as the expectations of China’s citizens for higher wages and quality of life have risen. China may well be approaching a tipping point for an economic  transition from being export focused to becoming  consumption-driven.  After  improving the world by manufacturing good basic products, Chinese businesses must now learn how to succeed through marketing and excellence.

Just as American brands like KFC, Coca Cola, Apple, Buick, and Pampers have learned how to successfully win over consumers worldwide, Chinese companies need to compete for brand preference employing more than a low price approach. Already, Chinese products are emerging as leading brands.  WPP’s 2013 BrandZ Most Valuable Global Brands research has 12 Chinese brands among the top 100 global brands. However, a closer look at this study reveals that the top Chinese brands are mostly successful in China alone, and in sectors where access by foreign firms such as telecommunications, banking and insurance, Web-based technology, and energy is restricted. Though there are many Chinese consumer brands, such as Haier, Tsingtao, Li-Ning, Lenovo, Baidu, Tencent, and Huiyuan Juice, marketing to consumers outside of China has not been highly successful for Chinese brands thus far.

Marketing guru Philip Kotler defines marketing as both an art and a science. Chinese firms have mainly concentrated on science, via price. Now they must become better at creating higher quality products, placing them in distribution outlets that Western consumers prefer, and promoting them with a direct appeal to Western emotions.  The best way to accomplish all this quickly is through the acquisition of Western firms with already established base of consumer preference.  Therefore, in addition to the establishment of new brands, we are likely to see a significant expansion of Chinese acquisitions of U.S. and European consumer goods brands in the coming years.

Is this a good thing? Acquisitions by foreigners tend to be accompanied by concerns. When U.S. giant Kraft acquired British Cadbury, there was worry about diminished  chocolate quality in the U.K. Now Americans (accompanied with much hamming it up by master comic Jay Leno) state that the Smithfield acquisition could lead to diminished quality and loss of American jobs.

Far from it ! The Chinese are not just obtaining products – imports and exports would have done that. Rather, the acquisition helps integrate China into the global economy, and contributes to its future branding success by delivering new connections, experience, capabilities and trust. The key benefits will be learning of both quality and marketing.

This article is a part of a series written by Michael Czinkota and Charles Skuba. Read part 1 here.  Guest writer Charles Skuba teaches international business and marketing at Georgetown University. He served in the George W. Bush Administration in trade policy positions in the U.S. Department of Commerce.