9/11 In remembrance: Terrorism and International Business

TERRORISM AND INTERNATIONAL BUSINESS:

Michael R. Czinkota, Gary Knight, Gabriele Suder.

The airplanes of 9/11 forced countless multinational corporations (MNCs) to update their strategic planning.  Our work with executives at more than 150 MNCs shows that more than ten years later, companies are still grappling with how best to manage the terrorist threat.

In the two decades before 2001, the rate at which firms launched international ventures was growing rapidly. After 9/11, foreign direct investment fell dramatically as firms withdrew to their home markets. The popularity of international-sounding company and brand names decreased appreciably as managers now emphasize domestic and local affiliations.

Continue reading

Global Update: VP Biden in India

Vice President Biden urged India to lower barriers to foreign trade and investment on Wednesday, July 24th 2013, in order to strengthen its economy.

Foreign businesses, including Wal-Mart, have reduced their investment plans in the country. India’s weak public policy has led its foreign direct investments to crumble by 21% this past fiscal year.

Sreeram Chaulia, a professor at the Jindal School of International Affairs in Haryana, claims “India’s value as a market for U.S. goods and investment is losing sheen. What the Americans don’t want to see in India is protectionist and populist policies.”

In order to increase investment in the country, Michael Froman, the U.S. Trade Representation, pointed out that “investors look for a consistent commitment to, not sporadic outbursts of, reforms. Most importantly, they look for the enduring confidence that comes from long-term, sustained, high levels of growth.”

If India chooses to follow Froman’s advice, US companies will pounce on the opportunity to get a foothold in this lucrative market and growth will soon be at her doorstep.

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 1)

For many Americans, Virginia ham is a long established part of a festive family dinner. But good old American traditions like that can carry new meaning in a global economy.  The recent news that Smithfield Foods, owner of leading pork brands like Smithfield Ham, Eckrich sausages, Armour meatballs and Farmland bacon, is to be acquired by Chinese company Shuanghui International Holdings Ltd. caused indigestion for some in the United States.

The $4.7 billion deal, announced on May 30, 2013, would be the largest acquisition of a U.S. company by a Chinese firm. It is another of a series of recent significant global acquisitions by Chinese firms. Other examples include the 2012 purchase of the AMC movie chain by Dalian Wanda Group Corp. of Bejing and the 2013 acquisition, of Canada’s Nexen by China National Offshore Oil Corporation (Cnooc). At year’s mid-point, 2013 promises to be a record year for Chinese foreign direct investment in the United States. It is also indicative of a new focus for Chinese investment : branded consumer businesses.

Chinese businesses, some state-owned, have proven remarkably successful in the global economy.  Many American companies in a broad range of industries source their manufacturing activities or components from China.  Within a few decades, China has developed into a manufacturing powerhouse, accounting for over ten percent of global exports.

This article is a part of a series written by Michael Czinkota and Charles Skuba. 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.

Foreign investment – a driving force of economic development, trade, and jobs

The United States Council for International Business (USCIB) joined with six other business associations to launch a new online information clearinghouse, Investment Policy Central, on Oct 16, 2012, New York, to strengthen an open climate for foreign direct investment in the U.S.

Foreign direct investment is an important driving force for economic growth, trade and jobs. Investment Policy Center will serve as a center for accurate and up-to-date information on the benefits of global investment, debunks common investment myths and provide links to a wide range of resources on investment policy.

For more information: http://www.uscib.org/index.asp?documentID=4394