I am definitely not the type of people who like to draw a lot of public attention. However, it is time for me to share what I know about about international trade and to explain why trade is more than an opportunity than a tread for our country and the world.
My interview with Long Island Business News was printed in the article on Feb 3rd. titled Heated US-Mexico talks fuel tensions for LI businesses. It is a mixed feeling to see my picture printed in the newspaper, especially side by side with the two Presidents. In this interview, I mainly discussed the wrong perception for international trade, especially the relationship between trading and unemployment. The followings are my quotes in the article:
” ‘Protectionism never worked for trading.’ She said, referring to the process of restraining trade between countries through such methods as tariffs and other means. Earlier tariffs, she pointed out, on steel and even the sneaker industry did not keep manufacturing jobs in the United States.”
“What we need is not a trade war, we need an open discussion to see how both countries can benefit.”
“Countries should trade on their strength. The U.S. strength is to produce financial services, innovative high-tech products, green energy products, etc. On Long Island, we export a lot of for the aviation and biotech industry. That should be out focus- not labor-intensive manufacturing job.”
“One outcome of NAFTA is that it helps improve the economy of Mexico, that enables Mexicans to afford to buy U.S. products. Nations’s improved economy boosts its standard of living, and reduces the number of Mexicans coming to the United States to find work.”
“As for jobs that were relocated abroad, don’t focus on brining those job back. Instead, provide training to those workers so that they have news skills and place then in other industries. We have unfilled manufacturing jobs, and we don’t have the skilled workers.”
“The focus should be on technology and innovative industries. How can we continue to be the leader of the world economy without those new industries? There is a perception that job loss from trade. But 80 percent of job loss today is from technology changes, automation, and computerization.”
Thanks to the newspaper of Long Island Business News, especially the reporter Adina Genn, to allow me sharing my thoughts with the local community.
Dear all students:
It is the end of the semester for the class of International Business. I hope you have learned plenty of knowledge and practices about conducting business internationally: You have learned the opportunities and challenges brought by international trade and globalization; you have understood why and how companies internationalize their business to remain their competitiveness; acting as as small businesses and non-profit organizations, you have exercised the process to export many wonderful products or service from the USA to the global markets; and you also have read many current news articles to be aware of the changing world today with the trend of anti-trading and anti-globalization which I believe to be a temporary setback for our society. At the end of the course, I hope you have developed an objective view about international business and may even expand your career into the global scale. Although the course is over, I hope you can continue to search for an answer for this important question for yourself: how can I remain competitive in today’s changing world?
First all, we should be all clear based on we discussed in the semester: job lost today is mainly due to automation, not international trade. “The US did indeed lose about 5.6m manufacturing jobs between 2000 and 2010. But according to a study by the Center for Business and Economic Research at Ball State University, 85 per cent of these jobs losses are actually attributable to technological change — largely automation — rather than international trade”.
Let’s remember the story of Kodak: In 1998, Kodak had 170,000 employees and sold 85% of all photo paper worldwide. Within just three years, they went bankrupt because the emergence of digital cameras. What happened to thousands Kodak employees in the past will happen to many other industries in the near future, because we are living in the 3rd and going toward 4th Industrial Revolution, driven by the growth of computation, artificial intelligence, and automation, “a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres”.
Even in the service industries, we see a tremendous shift of using technology, software, and artificial technology to replace human workers. McDonald’s and restaurant chains are using computer tablets as a solution for rising labor costs. IBM Watson artificial intelligence can provide diagnosis for patients and offer legal advice for clients, faster and more accurate than doctors and lawyers.
In short, we are not competing with other people around the world, but competing with robots and computers. It is what face us today and nothing can prevent us from the use of technology to advance the world. It sounds scary in a way because the job market today requires us having a lot more knowledge to be a competitive individual. I could not advice you what career you should go for a long-term job security, but I can say what you should do to become competent and ride the wave of technological innovation: You must be a creative and critical thinker, be flexible to adapt to changes, sharpen your skills and knowledge through continuous learning, and keep yourself informed with reliable information sources. And last, respect and collaborate with others. I hope that my suggestion will help you to identify a career which you are passionate about and become successful in. When you are prepared for the changes and equipped with innovative ideas, what globalization presenting to you would be more opportunities than challenges.
For those who graduate in December: My best wishes for your new endeavor and stay in touch with your college and your professors.
For those who come back in the Spring: Enjoy the winter break and see you around in the Spring!
As a scholar, the best recognition is to receive Best Paper award. It is always my goal to receive such award so you can imagine how I jumped up and down when my pedagogical paper received the inaugural CUIBE award for Best Paper on “Teaching International Business” at 2016 annual conference of Academy of International Business (AIB2016). As an educator, I also feel proud that my instructional approach is recognized as innovative and valuable for the education of international business.
The conference paper has been improved and published at Journal of Teaching in International Business, titled Improving Intercultural Competence in the Classroom: A Reflective Development Model. In this paper, I propose a four-stage reflective development model to enhance intercultural competence for undergraduate students and implemented in my class of International Management. The model provides a pedagogical approach for motivating students to engage in intercultural interactions, for helping them learn to make sense of their environment, and for advancing their learning about intercultural interactions.
After the exciting and cheerful PhD hooding ceremony, I am now officially titled as a Doctor of Philosophy. I am delightful to achieve such a milestone in my life after four years of studying in the doctoral program in Georgia State University. I would not say that it has been easy for me to get here. I am yet to be a successful researcher in my field as I am still struggling with to get my first academia journal publication. However I would say that I had an enjoyable experience during these years pursuing my doctorate, while being a first-time mom to raise my son from a crying infant to a happy little man, and assisting my husband growing his photography business. I have been extreme fortunate in my path to achieve such milestone: I am fortunate to meet Dr. Tamer Cavusgil as an undergraduate student in Michigan State University, who is a distinguished scholar in the field of International business and led me to the path of PhD over a decade; I am fortunate to meet Dr. Leigh Ann Liu, my faculty mentor and advisor, who opened the door to the intriguing subject of cross-cultural management and inspired me in many ways as a researcher; I am very fortunate to have my supporting and hard-working spouse, Zac, who helps me getting through these years without complaining; and I am very fortunate to be in a doctoral program which allowed me balancing my life and study. Very soon, I will begin my new life as an assistant professor and face other new set of challenges. It is time for me to reflect what I have learned from my PhD program and hope I can apply them again in my future career and life. In particular, what are the most important factors to make my doctoral experience as a cheerful and memorable journey?
Spirit of Entrepreneur
Majority of doctoral program in the United State is very well structured with seminars. We learn various research methods and literature before we start our dissertations. However, we often have to deal with ambiguity and confusion during our study. At the beginning of my program, I had very vague idea about research and did not know what I would be interested in. Unless some advisors would like their students to carry on researches based on their agenda, it is often up to us to identify our own research subjects which interest and inspire us to explore and discover. Like entrepreneurs, we will identify opportunities and challenges, develop an actionable attack plan, grow “thick-skin” from rejections, seek for supporting resources, and learn the right way from many trials and errors. With such spirit, we can get away from all those frustrations from rejections and failures, and keep us going in high spirits.
Curiosity of New Knowledge
In my past education, I had various trainings in the subjects of management and business administration, from accounting, to finance, to process improvement, and to strategy management. However, I felt what I had been lacking is the knowledge of how people, individuals, or groups, or companies, make their decisions and behave in organizational settings. I expand my readings from management to sociology and psychology, which lead me to another world of knowledge about the software of the mind. It can be a curse for me as a researcher because I have a wide range of research interests instead of focusing on developing myself as subject expertise. However, I could not only enjoy conversing with scholars from other fields, but also apply the learning from other disciplines into my field. The continuous learning from broad (although lacking of breath) subjects enlightens me with the power of knowledge and keeps me pondering and seeking answers for my questions.
Passion of Discovery
It is more important to choose research subjects that we are passionate about. There are roadblocks and challenges in the path of researching. Many tasks are tedious and repetitive. The paper revising process is frustrating and endless. I have to confess: I have projects sitting in my file-drawer and feel reluctant to revisit. However, for the projects I am truly interested in, I could stay motivated and excited with the small new findings and progress. It is the passion of discovery keep me going to overcome the challenges and to stay focused.
Relax Whenever Necessary
We have very limited time, while we have so many things to do with our family, teaching, researching, and socializing. We barely have time to take a break. But I would suggest anyone feeling burnout to take a break once a while. If we feel that we are stalled and going nowhere, why not stop reading, writing, cleaning, and anything we are planning to do, but watch some comedies or take a long night sleep. Yes, we need to work hard because we have pressure of publication and tenure, but we should also enjoy our life as a spouse, a parent, a child, and a friend, and spend time with people important to our life. We should treat ourselves fair, if not nice. Taking a break from what we are stressed about can often give us a new look later on.
The list can go on, but those learning is the most important for me to help me through my doctoral program. I believe those thoughts will continue to help me enjoy my future career as a scholar. But most important of all, quote from Dr. Cavusgil’s key-note speech during the hooding ceremony, “Take what life gives you. Don’t hesitate to embrace chance.”
Both cases illustrate the typical challenges facing western retailers success in China. The big-box retailers not only need to face the challenges from their local competitors and the different practices in Chinese retail industry, but also to adapt to Chinese consumption culture. Facing the complex operating environment, both companies need a long-term vision and commitment to strengthen their brand image and create values for their customers.
Recently, there have been a lot of discussion about China becoming the next innovation super power. A recent HBR blog “Get Ready for China’s Innovation Juggernaut” alerts the readers that China is making huge strides to transform themselves as an innovative nation. It uses examples that more than 100 million registered private enterprises in China; the Chinese firm Huawei was third among all companies in number of patents filed last year; and media conversation these days centers on when, not whether, China will produce a success story like Steve Jobs’. For the first time in 2009, four Chinese companies are listed in the 50 Most Innovative Companies ranking by Bloomberg Businessweek, while American companies on the list decreased from 35 in 2007 to 22 in 2009. All signs are pointing to the fact that China is going to become next innovation power house.
On the other hand, there are doubts existing about Chinese innovation capability. An earlier NPR report Plagiarism Plague Hinders China’s Scientific Ambition pointed out that 31 percent of papers with unreasonable copying and plagiarism. Blame lies in part with traditional Chinese culture, as many scientists believe, which values rote memorization and repetition and holds that copying a teacher’s work is a way of learning.
No one can deny the fact that Chinese government is pushing innovation with strong incentive policies. From WIPO data source, China is the only major country with increased Intellectual Property (IP) application in last two years when other countries experienced IP application decreasing because of financial crisis. We can argue that IP application only means quantity, not quality. However, we also see China has a dramatic increase in IP granted. Below graph illustrates Top 10 countries of IP granted according to WIPO data from 1995 to 2009.
Japan has been the leader of IP granted, followed by the United States. Korea surpassed Germany becoming the number third since 2004. However, China passed Korea in 2009 while Korea experiences a significant drop in IP granted since 2007. According to the NPR report, China is forecast to become the world’s leading innovator in 2011, overtaking the United States and Japan in number of patent filings.
There is no doubt that China is very good in enhancing current technology. However, the question lies whether China can create “disruptive” technologies or services, which can lead the market and build the brands, such as Apple, Facebook and twitter. Government policy motivates the number of IP application or grants, but perhaps majority of those innovation are incremental improvement and development, instead of breakthrough creations which can drive much more value for the business and the society.
Thus, come back to my question: will China become next innovation super power? To my knowledge, Chinese are still learning how to be more creative and more innovative. If China wants to become the most innovative nation, the government policy should drive a scientific culture which emphasizes quality, instead of quantity, with an innovative environment embracing patience, persistence and precision.
I am reading the article by Dr. Dan Steinbock, Apple iPhone4 Success Masks Global Strategic Challenges, posted on Harvard Business Review blog. Dr. Steinblock compares Apple and Nokia in their global presence, and states that although Apple enjoys a huge success in the United States for the smartphone market, Nokia has advanced in l strategical development toward a global market, especially in emerging markets. The article concludes that “Apple needs to adopt a dual business model, one for the advanced economies which enjoy high living standards but relatively slow growth, and another model for emerging economies which have relatively low living standards but enjoy high growth”, and that “global leadership requires success in the advanced economies and the emerging world.”
While I can fully respect Dr Steinbock as the Research Director of International Business at India, China and American Institute (USA) and Senior Fellow at the Shanghai Institutes for International Studies (China),as a highly respected expert in the field of international business and global strategy, I pause to wonder if Dr. Steinbock is an iPhone user, or is familiar with it. I am not a big fan of Apple, but I happen to use an iPhone and know about this product; I believe that I may be able to present some valid arguments to justify why a dual business model is not necessary for Apple.
First,let us conduct a side by Side comparison for Apple and Nokia according to their 2009 annual report.
It is not necessary to discuss the gap of the market capital and the stock price between Apple and Nokia. Our comparison will rather review each company’s operational key performance indicators. Apple reports two billion more in revenue than Nokia, but to clarify, the Apple data includes products beyond Smartphones such as iPods and Mac Computers. The iPhone accounts for 30% of the total revenue. Apple’s gross profit margin for 2009 is 41% with an income before tax of 28%. According to the analysis from iSuppli Corp, iPhone has a profit margin of almost 52% for the cheaper model. Comparatively, Nokia, a manufacturer of mobile devices, has 32% of gross profit, with only a 2.3% income before tax. Nokia’s R&D cost is high at 13% vs. only 3.1% for Apple.
From this comparison, we may conclude Apple has a business strategy of “Differentiation”. Apple enjoys a high profit margin from the well-designed high-end Smartphone. Apparently, Nokia is heading toward a different strategy to become a “cost leader” to focus on more low end products with lower margin. My speculation is further articulated by the article, Nokia to Halve Smartphone Production in 2010, Official Suicide Watch Starts Now. Nokia announced it would halve production of its Smartphones in 2010, to gear itself toward a concentration on ‘dumbphones’, or “mid to low end Smartphones.” Nokia Smartphones’ R&D also “cut down unnecessary differentiation”. While I choose not to comment on whether Nokia is choosing the right business strategy, it seems a fair assumption that their focus on low-end Smartphones is directed toward a global focus met to face an increasing demand in emerging economies.
It seems paramount that we should ask this question: Why is the Apple R&D cost is so low in comparison to Nokia? I believe that the answer lies hidden within Dr Steinbock’s article. Nokia is a device manufacturer however Apple uses OEM (Original Equipment Manufacturer) Foxconn to produce their Smartphones. Although I do not have inside information, I believe Apple collaborates with Foxconn for product development. Utilizing the supplier’s technology and production expertise, Apple is able to focus on their core competency of product design and software program development and achieve such low R&D cost. Apple has only one model of iPhone with some variation of memory size, which is naturally easier for mass production, and allows the achievement and maintenance of lean inventory management. This results in a lower COGS (Cost of Goods Sold) and a higher gross profit margin. Nokia, on the other hand, released 13 Smartphone models in 2009, which increased not only their R&D cost, but added a level of complexity to its supply chain and increased the capital investment required to manage the vast array of models.
So when iPhone is considered a luxury product in the Smartphone market, why would they require different pricing strategies for different markets? It is my belief that it is not required. Just as Louis Vuitton for purses or Rolex for watches, premium brands do not require different prices for different markets. This is especially true for the Chinese market, where premium brands are considered to be an indicator of personal social status. I cannot speak for the Indian market without further research, but Chinese consumers are willing to pay for premium and trendy products. Before Apple settled an exclusive sales agreement with China Unicom for the exclusive right of iPhone sales, iPhone had been sold throughout China on the black market at a premium price. Many Chinese consumers asked their friends or family in U.S. to buy unsubsidized iPhones for them to use in China. The iPhone initially failed in China, not because of the cost barrier but because of GSM (Global System for Mobile Communications) compliance, thus forcing Apple to redesign the iPhone for China to meet the Chinese wireless network requirements. Even after prices were cut to 3,000 yuan ($439.46) in April by the carrier China Unicom, Chinese consumers are still paying significantly more than U.S. consumers for an iPhone without subsidy from the wireless network carrier. However, contrary to what Dr Steinbock claims in his article that Apple flopped in the Chinese market, Apple’s Chinese iPhone sales exploded and largely contributed to the growth of Apple last quarter sales, with estimated 2.1 million iPhone sold in China within 6 months.
A lot has been said, I believe I have answered the questions:
Does Apple need a global strategy? Absolutely, yes. Apple should establish and expand the distribution channels in different nations, with possible redesign to meet local market requirements. It is also crucial for Apple to work with its suppliers to meet its increased demand.
Does Apple need a dual business model for the advanced economies and emerging economies? I do not believe so. iPhone sales are disappointing in India or other emerging markets due to different consumer behavior, so be it. There is still much room for growth in the global high-end Smartphone market. Smartphone users typically replace their phones every two years as contracts expire. Apple enjoys such high profit margin from a single Smartphone model, so it is not necessary for Apple to add additional resources to develop a low-end model for those markets and dilute its premium brand image, just like we can not imagine Louis Vuittonor or Rolex producing a low end product for low-income consumers. Being a global leader does not necessitate becoming the leader of market share in quantity while struggling with profit margin. Apple is definitely a leader in the Smartphone market with their product design mission to “be sweet to customers and vicious to rivals”. I foresee that we will continue to see the growth of Apple in the Smartphone market.
It wasn’t for the project which I am currently working on for a China plant tissue culture (TC) company, I would never have experienced the challenge from the weakness of Intellectual Property (IP) protection in the Chinese market.
It is the first time that I am working so closely on IP issues in China. The plant Tissue Culture company, Jin Bei (aka, JBSbio), based in Shanghai, China, has been focused in the Chinese domestic market for the past two decades. They have been very successful as a market leader in the region with a reputation of reliable high quality. Last year, with a new investment of $4.5 million into world class new equipment, the company was ready to expand into the overseas market. Through a friend’s connection, they asked me to help them break into the U.S. market.
I have been traveling for the company to meet the potential clients, not only to promote the propagation service that the company can provide with its’ Tissue Culture technology, but also to connect with the U.S companies who are interested in getting their products into the Chinese market. With the booming economy in China, needs for gardening and landscape are booming as well, in parallel with the rising market of housing and public construction.
So anyone would think that selling into China will be an easy task once we have good products. The answer is no, absolutely not, because of the weak protection of intellectual property in China. Piracy in China is not something new. It’s sad for me to say this as a Chinese, but China has a reputation of counterfeiting design or content of patented products. We are all familiar with those knock-off products such as luxury handbags, watches, electronics, and clothing. The knock-offs are sold at a much lower price, so consumers can choose to pay much less for fake premium products if quality is not a concern to them. There are even some tragedies that people consumed counterfeit food and were poisoned! Many foreign companies come to China and have been fully challenged by the culture of deficient IP awareness. So, China, a country of invention only in ancient times, becomes a well-known country of “stealing” IP. Even though more regulations and laws are created after China entered the WTO, the IP control has not become easier for many investors.
I am facing a huge obstacle to introduce new horticultural products into the Chinese market. Breeders normally spend thousands upon thousands of dollars in developing a new plant variety through years of experiments and growing. That is why we can see more and more beautiful, colorful plants around us. In the past 30 years, the IP regulation has been well developed in U.S. so most businesses are playing the game by the rules. However, the Chinese market is like the Wild West, which can be easily out of control for horticulture products. Think about it, any plant grower can take a branch of a plant and duplicate it through cutting technology. Learning from the painful experience of losing IP in the Chinese market, some companies choose to give up on China altogether, or only bring to market the second tier quality products, which in result make my objective of introducing new products to the Chinese market more challenging! When I see those beautiful new flowers and plants which can be easily duplicated, I can’t help to feel regret about the fact that Chinese consumers may not have much chance to enjoy those nice and beautiful flowers in the near future.
However, the existence of risk does not mean one should not take any risk at all. Actually it is a good thing the Intellectual Property issue is not a hidden risk so we all know it is out there and we just need to take more cautious approach when we go to the market. The following are my suggestions on how to deal with the IP issues in China:
First, choose a reliable partner with a good reputation. It may not be an easy thing sometimes because Chinese hardly says “No” to opportunities. So, if a company tells you “No” for some reason, it is actually a good sign that this company is doing business honestly. At the same time, spend time to research the background of the potential partner, to visit their facility, and to observe how the owner or manager works and treats their employees. A company that treats their employees well will also respect their business partners, which is potentially a long-term trustworthy business partner. Don’t feel frustrated if you have a bad experience in the Chinese market. There are plenty of honest businesses out there looking for a long term partnership.
Second, utilize key technology to prevent easy counterfeiting especially when R&D is a big part of the product development. Intel is a great example for this approach. No one can counterfeit their CPU due to their technology. A company can develop complex products unique characters from which core technology cannot be duplicated.
The third approach is to use the trade mark and a branding strategy. Believe it or not, China has a culture of brand awareness and will pay a premium for a brand which is associated with high quality and a high social status. Not to mention those well-know consumer goods, JBSbio, the Chinese Tissue Culture company, uses the branding strategy for their own breeds and has been successful to protect their products in their homeland. The foreign company going into the Chinese market should definitely use a branding strategy at the beginning of entering the new market to establish their name and increase brand awareness.
The last strategy will be entering the market with a second tier product or with products which are going to be out of patent if an IP violation is inevitable. Charge premium prices at the beginning of market introduction and then lower the price when the market is flooded with knock offs. Meanwhile, introduce the market quickly with new products to sustain its market leader status..
As a conclusion, it can take another decade for China market to have Intellectual Property regulation well enforced. However this obstacle should not become a barrier for any international business to wait for a safer environment and miss the growth opportunity. Understanding the market risk and taking the appropriate approach to go with the flow and capture the opportunity in a new market can be highly rewarding and profitable.