Thailand’s Economic Success

While countries around the world like the United States and those in the European Union are suffering, Thailand has reported a gross domestic product growth of 18.9% compared to last year. This growth can be attributed to the devastating floods in 2011 which diminished both production and consumption. By comparison, the current investment in rebuilding supports growth.

On Monday, February 18th Thailand’s government reported that the GDP growth for 2012 was 6.4%, with expectations for 4.5 %– 5.5 %growth in 2013. Whether the growth will mainly be in manufacturing or in services (such as medical tourism) is a key question.

Global Call Center Industry Rises in the Philippines


The Philippines is a small island nation located between the Pacific Ocean and the South China Sea. Its geography, climate and large labor force has allowed it to focus on the agriculture and manufacturing sector throughout the past decades. Because of cheaper alternatives, and of lack of investment and technology advancement, the country has fallen behind its neighbors in these fields. However, it has two characteristics that have helped it find its niche and create competitive advantage. Namely: Hospitality and English.

Large multi-national companies have been shifting their call center operations from India to the Philippines. Though India boasts a population more than ten times that of the Philippines, by the end of 2011, about 400,000 Filipino customer service representatives spent their nights talking to mostly American consumers as compared to the 350,000 in India.

Companies like JPMorgan Chase, telecommunications operator AT&T, and the travel booking service Expedia work with call centers in the Philippines. As a country with the largest number of youth in the East, schooled in Western culture, the Philippines seems a great choice. European and Indian companies have followed the same trend to the Philippines.

The Philippines is a strategic choice for many reasons. The country is located in the middle of South East Asia just an hour away from Hong Kong and four hours from Singapore, where the main Asian offices of many corporations are located. Many jobseekers hold university degrees ranging from chemical engineering to communications in addition to their mastery of English. The Philippines also has a 95.4% literacy rate according to a United Nations Development Program Survey. In contrast, India has a 74% mean literacy.

Though English is the official language for both countries, there are key differences between the two countries. Filipinos start learning American English in the first grade. In addition, common themes in American culture such as the NBA, hamburgers, and the television show “Friends” have become part of the Filipino growing up experience. In contrast, Indian public schools introduce British English in the third grade. Cricket is the national pastime.

The Philippines has “a unique combination of Eastern, attentive hospitality and attitude of care and compassion mixed with what I call Americanization,” said Aparup Sengupta, chief executive of Aegis Global. The outsourcing firm based in Mumbai, India, acquired Manila-based People Support in 2008 and now employs roughly 13,000 Filipinos.

Compared to India, Philippine infrastructure is better suited to handle the utility needs of call center operations. Contrary to India, there are almost no blackouts which greatly lessen the cost of generators and diesel fuel. Cities in the Philippines are also relatively safer and have better public transportation, eliminating the need for companies to bus their employees to and from the office.

Firms that initially focused on cost reduction now find that this is not enough. Companies that pay an average of $250 a month in India have shifted their operations to Philippines despite the higher monthly costs of $350 per month – a 40% increase. The question has shifted from “How much?” to “How well can you do it?” In an increasingly competitive environment, firms have seen that service has started to play a much larger role.

The Philippines’ global market share of the call center industry is expected to increase to 32% by 2016 up from 24% in 2010. In the next 5 years, revenues are projected to reach $14.7 billion with employment doubling to above 800,000 employees.

Western executives are expecting the Philippines to continue growing fast and to move up to higher-value services like accounting and insurance claim processing. But, similar to India, companies are struggling to cope with increasing domestic inflation and a shortage of skilled professionals. For now, however, companies remain optimistic of the opportunities and the services the country has to offer.

Contributed by Quintin Eusebio and Ireene Leoncio, both of Georgetown University

Sources: “Philippines Unemployment Rate.” TradingEconomics.com. Trading Economics, 01 Oct. 2011. Web. 12 Feb. 2012. <http://www.tradingeconomics.com/philippines/unemployment-rate>.; Ho, Abigail M. “Contact Center Revenues Seen to Hit $14.7B.” Philippine Inquirer [Manila] 1 Aug. 2011, Inquirer Business sec. Print.; “Phl Contact Center Industry to Double in 5 Years.” Phil Star. Philippine Star, 15 Aug. 2011. Web. 12 Feb. 2012. <http://www.philstar.com/Article.aspx?articleId=716721>.

The Janus Face of International Marketing – Part 2

Distorting aspirations. As economic growth in emerging markets allows millions of people to enter the middle class, it brings great new opportunities for them to improve the quality of their lives. It also exposes them to the challenge of rising aspirations with limited income. New international consumers must learn how to manage their aspirations as they experience emotional marketing appeals for products and services that might not be considered practical or “good for them.”

In a chapter titled “Ethical Lapses of Marketers” in Jagdish Sheth and Rajendra Sisodia’s book, Does Marketing Need Reform? (M.E. Sharpe, 2006), good friend Philip Kotler posed two dimensions of “the marketing dilemma” for all marketing: (1) What if the customer wants something that is not good for him or her? (2) What if the product or service, while good for the customer, is not good for society or other groups? How consumers, marketers and societies manage that dilemma in international markets will need to be resolved on a country-by-country basis.

Coping with culture. All too often, cultures are insufficiently studied or wrongly interpreted. It might seem that responsiveness to cultural differences should be second nature to marketers and therefore virtually reflexive. However, cultural differences continue to challenge marketers and can negatively affect the marketplace. Many times, disregarding local idiosyncrasies is like the introduction of a destructive virus on a culture. For example, bringing snakes to Guam almost exterminated all birds there. Or, when selling construction wood to Japan, the importer of the boards needs to consider both the typical Japanese “tsubo” size, as well as the Japanese tendency to build smaller rooms. Not doing so supports the success of competitors and leaves Japanese purchasers dissatisfied.

 Though there is frequent talk about how we understand each other so much better than in the past, the reality looks different.  The actual overlap between societies is typically very miniscule. There may be a number of Chinese industry leaders who have been to the United States and have developed a clear understanding of America and Americans, but they represent a very small fraction of the Chinese populace. The average Chinese person may knowledgably understand as much about Columbus, Ohio, as the average Buckeye State resident knows about Tianjin. The consequence of that limitation is a danger of misunderstandings and susceptibility to hostility.

Why Trade Is Good For Your Country and Company

It is hard to understand the value of global trade and exports in particular. Exports can determine the level of imports that a country can sustain, affect currency values as well as the fiscal and monetary policies of countries, and shape public perception of a nation’s ability to compete. In 2008, the U.S. was importing 1.5 times as much as it was exporting, creating a trade deficit of $680 billion. Large trade deficits are not sustainable in the long run. They are a strong indicator that a country is consuming more than it is producing, which reduces independence by making it increasingly reliant on the products and services of other nations.

Increasing export volume helps reduce the trade deficit. This is a wise course of action for many reasons, but one of the most important is that exporting creates jobs. In fact, the International Trade Administration of the U.S. Department of Commerce reports that, in 2006, exports of manufactured goods supported 6 million U.S. jobs. Just as importantly for companies, however, is how exporting can help them achieve economies of scale. By broadening reach and serving customers abroad, it is possible to produce more and to do more efficiently in industries affected by economies of scale. This often leads to lower costs and higher profits both at home and abroad

 

This is an excerpt from Dr. Czinkota’s book Global Business: Positioning Ventures Ahead, co-authored by Dr. Ilkka Ronkainen.

Michael R Czinkota and Ilkka A Ronkainen, Global Business: Positioning Ventures Ahead (New York: Routledge, 2011), pg. 14 -15. 

Click HERE to acquire the full book.