For Your Long-Term Success Sponsor Innovation And Enter Asian Markets, with Peter R. Dickson

In a recent column in Marketing Management we explained the inevitability of the rest of the world catching up to us in business and technical expertise and why it is imperative that we increase the productivity of our innovation commercialization as a nation. We suggested nationwide innovation scholarships that create thousands of new businesses started by American engineers, scientists, artists, artisans and other innovators.

In this column we expand on our proposal by explaining how CEOs like yourselves in collaboration with universities can gain great benefits by increasing the innovativeness of your company by sponsoring and working with innovators. For, say $25,000 you can support the commercialization of an innovator’s idea. The University pays another $25,000 because Universities must be forced to invest at least some of their endowment in innovation and walk the talk when it comes to a re-structuring of the U.S. economy. So what you get is a $50,000 scholarship in your name to help start-up an innovative idea in your industry. Such collaboration can then work in local incubators or by developing a cluster of innovations in order to accelerate social ventures as the S&R foundation does at Halcyon House in Washington D.C.  Good idea? No it’s not a good idea, it’s a great idea so this is what you have to do.

Get together with other local CEOs and approach your local University Presidents and insist they develop such a program that you as a group can support 50:50. It will happen. If you persist it will happen and you will be forging a much better future for the United States by serving your own self-interests as well.

Oh and another thing. Almost all of the growth in consumer product and service markets over the next 50 years will be in China and India and it will be huge. Are you in on the ground floor on this? Do you have a Chinese partner yet? An Indian partner If not, then you are giving away these market to, by then local Chinese and Indian companies that in 10 years will be coming  over here and to all those international markets which you serve now. If you’re not prepared, they will eat your lunch. This is a certainty.  They will be the largest consumer product and service companies in the world. And if they learn by doing and they do a lot more than us, they will be best in the world at doing things well. Think about an Indian partner and investing in these markets. Think about a Chinese partner and investing in these markets. You owe it to your customers, your employees and your successor.

Peter Dickson (dicksonp@fiu.edu) is an Eminent Scholar and Professor at Florida International University

Michael Czinkota (czinkotm@georgetown.edu) is a Professor of international marketing at Georgetown University

This article is also published by CEOWORLD Magazine. See at: http://ceoworld.biz/2016/04/18/long-term-success-sponsor-innovation-enter-asian-markets

Considering Labor Costs in Foreign Expansion

by Guest Blogger Nick Rojas

Ever since the National Science Foundation ended its sponsorship of the “NSFNET Backbone Service” on April 30, 1995 any remaining restrictions on using the Internet for commercial purposes were lifted. This resulted in a revolution for many industries, especially those focused on information and communication.
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All of a sudden, you did not have to go to the local library to look up information on subjects you were researching. You also no longer had to contact newspapers and magazines to issue job postings.

What was happening on a local level would soon cross international borders and connect entire workforces, industries, and populations. Outsourcing labor and expanding export and import infrastructures soon became a trending topic for an increasingly connected, global society of the 21st century.

Why Outsource?

The U.S. and large parts of Europe underwent massive economic growth in the second half of the 20th century. With all the growth, however, came the increase in local labor and energy costs.

This was one of the main reasons why many Western corporations began to invest into production facilities in foreign markets, where labor costs were comparatively low and where they could give local economies a boost.

Made in China

One of the nation’s becoming most popular during this era was China, which made a name for itself by offering high productivity at low wages – as low as 100$ a month for non-skilled labor in Chinese factories. The “Made in China” label, to this day, is synonymous with cheap manufacturing labor, as opposed to, for example, the equally famous “Made in Germany” (representing high quality engineering).

Even though China is a Communist country, it was able to build a capitalist economy integrated into the World market. This, however, combined with the increased exposure to Western standards and philosophies among the Chinese population – due to the Internet – has in recent years led to many demonstrations and a generally more pressing uprising of the Chinese labor force against corporations and the government, echoing what Europe went through during its Industrial Revolution in the 19th century.

So while China is still a cheap manufacturing market, investments into the nation’s cheap labor force are becoming increasingly risky considering the latest political developments, which are only now gaining momentum and will continue to raise awareness as the rest of the world learns more about the situation.

India – a Valuable Tech AllyNick2

If China is known for cheap manufacturing labor and Germany for first class engineering, then India is the nation that offers the highest density in talented software developers and other computer-based services.

There are two main reasons for this, the first one being that not only colleges, but Indian companies also invest into technology-related education of young adults. Secondly, since India’s industrial infrastructure is still catching up to Western standards, the chances of landing a job in the mechanical, electrical, or chemical fields are low. In addition to that, many American and European companies are increasingly outsourcing software-related labor to the Indian market, so this trend is not going to change anytime soon.

While China is struggling with an increasingly difficult political situation, an interesting synergy is starting to develop between Western and Indian people. The latest generation of entrepreneurs of companies like Facebook, Uber, and WhatsApp consists largely of Millennials, the first generation that grew up with access to the Internet.

Their exposure to global information and cultures has turned them into a tolerant, curious, and cosmopolitan generation. For Millennials, globalization is not a new development, but status quo.

As a result, they don’t see their Indian counterparts as just another source for cheap labor, but as potential partners who share the same passion and interest – technology. So while wages in India are still much lower – an experienced programmer in the U.S. makes up to $200 an hour, whereas Indian developers charge closer to $20-30 an hour – this growing “partnership” between generations and nations will have an impact on Indian labor costs, especially in the area of software development.

Other Markets

China and India have certainly become very popular for their outsource-friendly workforce, but South America and Africa are going to be interesting to watch over the next few decades as the United States is making significant investments into their local infrastructure, renewable energy, and banking system.

Conclusion

It might seem like commercial Internet has been around forever, but it has really only been around for two decades. Considering the massive impact on the global marketplace it has already had, it is clear that we will see dynamics shifting between foreign markets over the course of the next century, and labor costs will be one of the most important factors to watch.

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Nick Rojas is a business consultant and writer who lives in Los Angeles and Chicago. He has consulted small and medium-sized enterprises for over twenty years. He has contributed articles to Visual.ly, Entrepreneur, and TechCrunch. You can follow him on Twitter @NickARojas,. or you can reach him at NickAndrewRojas@gmail.com.

Licensing in India – Should it be restricted or promoted?

I am teaching a course on International Business here at Georgetown University. This Spring, we have concentrated on writing editorials on international business and trade issues. All my students have written and handed in one editorial dealing with an issue of their concern. I was very impressed by their work, particularly since these young tigers, as we call them here, are the ones ascending in their societal position. They will be the ones running their family’s firm, electing the next government, and deciding what their aging parents should do. So to my mind, their opinions matter.
Take a look:

By Nicole Colarusso

The two words “royalty restrictions” are not as attention-grabbing as “terrorism” or “nuclear war.” Yet they have sparked a royal debate in India. For many years, the country’s licensing rules constrained international companies. According to The Economic Times, India’s outgoing royalty payments for technology transfers were limited to 5% of domestic sales and 8% of exports. These restrictions were lifted in 2009. India’s Department of Industrial Policy and Promotion wants to re-impose the constraints. This attempt is blocked by India’s Ministry of Finance. Doing so is a prudent decision. Indian government officials should endeavor to preserve and promote free licensing in the future.

The opposition argues that an absence of royalty limits would cause a great increase in financial outflows from India. As a result, local businesses would lose money. The Indian current account deficit would grow. Tax revenue would decrease, and Indian licensees would become dependent on foreigners.

Free royalty flows are important. India already has a difficult business environment. The nation’s bureaucracy has burdened businesses with immense paperwork and petty inspections. A World Bank press release bemoans the country’s “inefficient transportation, notably roads, maritime services, and ports.” Licensing, by allowing citizens to take advantage of technology and processes that have already succeeded, provides a way for local entrepreneurs to bypass inefficient business activities. Restrictions would decrease foreign direct investment and stunt local economic growth.

Foreign businesses and entrepreneurs would benefit from free licensing as well. It enables companies to speed up market penetration, test out business environments, and become familiar with other cultures.

A decrease in investment could also negatively affect India’s trade balance. The Wall Street Journal acknowledges that annual outgoing royalty payments have almost tripled from $1.7 billion in 2009. But, the deregulation will have long-run positive effects on the balance of payments. Gains from international licensors will enable foreigners to purchase more Indian goods, thereby creating a larger demand for Indian exports.

Royalty limits could also hurt the people of India. Licensing provides Indians with the skills and knowledge to use advanced products, services, and processes. Technology transfer can substantially increase the competitiveness of local companies, particularly in industries such as pharmaceuticals where licenses can be more valuable than capital. Consumers’ exposure to high-tech, revolutionary items can substantially improve their lives. For instance, Microsoft’s presence in India has significantly increased local access to computers. If licensing becomes less attractive to investors due to restrictions, Indians would have fewer opportunities to learn about new products.

Finally, there is the matter of unemployment. According to a 2013 International Labour Organisation report, only 21.1% of Indian working men had steady, salaried jobs. Decreased licensing could intensify an already pressing issue. Also, multinationals that currently license heavily in India, such as IBM, Nestlé, and Unilever, could decide to focus their energy on other countries. Corporations looking to begin licensing abroad may be deterred from starting future large-scale projects on the subcontinent.

Free licensing is an engine for growth. Limits on outgoing royalty payments could have long-term negative consequences for India. There can be a time and a place for restrictions, but Indian officials should show that it is neither here nor now.

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Nicole Colarusso HeadshotNicole Colarusso is a sophomore studying international business and finance at Georgetown University.

This editorial was published in Ovi Magazine on 24 April 2015.
Congratulations! Outside validation is always good.

WTO Favors US in AG Trade Dispute with India

Christopher Doering for The Des Moines Register

The trade panel struck down a 2007 agricultural ban put in place by India to prevent avian influenza from making its way into the country even though the United States has not had a case of the highly pathogenic disease since 2004. The only other U.S. outbreak detected since then was low-pathogenic, which does not support an import ban.

The WTO ruled India breached numerous international trade rules, including imposing the ban without adequate scientific evidence.

The United States challenged the ban in March 2012.

U.S. trade and agricultural officials declared the WTO decision a major victory for American farmers. “Our farmers and producers deserve a level playing field – and this dispute reflects that we will accept nothing less,” said Agriculture Secretary Tom Vilsack.

The WTO ruling would help U.S. agricultural producers, including Iowa, the nation’s largest egg producer, that have been affected by India’s restrictions. The poultry industry estimates U.S. exports to India could jump to more than $300 million annually after the restrictions are lifted. India has 60 days to appeal the ruling.
Read Full Article

OECD proposals to have impact on transfer pricing in India

NEW DELHI: Once implemented, the measures proposed by OECD to curb tax avoidance activities would have “far reaching implications” in India’s transfer pricing landscape as well as a significant impact on US multinationals with overseas operations, according to experts.

Paris-based Organisation for Economic Cooperation and Development (OECD), which sets the global tax standards, published a seven-point BEPS ( Base Erosion and Profit Sharing) recommendations on Tuesday.

Companies having international operations would have to work towards not only adhering to compliance obligations but also review the operating structures in various jurisdictions, he said in a statement.
The proposals, which have been prepared after extensive consultations with various stakeholders including G20 nations.

Read Full Article in The Economic Times