What globalization really means ?

A dozen years ago, Peter Drucker predicted what multinational corporations of the future would look like, saying that they were going “to be held together and controlled by strategy” rather than defined by who owned them.

“There will still be ownership, of course,” Drucker wrote in Managing in the Next Society. “But alliances, joint ventures, minority stakes, know-how agreements and contracts will increasingly be the building blocks of a confederation.”

Last week, Drucker’s vision came into full view. Bo Andersson, a Swede who served as a top executive at the American auto giantGeneral Motors, was nominated to become the first foreign president of OAO AvtoVAZRussia’s biggest car maker, in anticipation of its takeover next year by a French-Japanese alliance of Renault and Nissan. (If you weren’t counting, that was five different countries mentioned in the preceding sentence.)

It is hardly news that the world is now tightly stitched together. But it is easy to lose sight of just how quickly and thoroughly globalization is taking place, and just how much it is changing the way businesses are being managed.

Andersson’s rise neatly captures the trends. AvtoVAZ tapped the 58-year-old industry veteran nine months or so before the Renault-Nissan deal is scheduled to be completed. The Russian government will retain a minority stake in the venture.

Renault and Nissan hope to revive AvtoVAZ, which has seen demand shrivel for its once-ubiquitous Lada, a boxy contraption long the butt of one-liners. (My favorite: What do you call the shock absorbers on a Lada? Passengers.Another: What do you call a Lada driver who says he has a speeding ticket? A liar.) The vehicles built by the reconstituted enterprise will be decidedly more Western in their look and feel, feeding a sensibility that Drucker believed was at the heart of our shrinking world.

“Globalization is not an economic event; it’s a psychological phenomenon,” he observed. “It means that all of the developed West’s values—its mindset and expectations and aspirations—are seen as the norm.”

This idea crystalized for Drucker when, in 2001, he was visited by an old student of his—a native of Taiwan who was then working in Shanghai. “What’s the most important thing that has happened in China the last three to five years?” Drucker asked him.

The former student thought for a few seconds and then replied: “That we now consider owning an automobile a necessity, and not a luxury.”

The same is true in Russia, which analysts expect to pass Germany and become the largest car market in Europe. But exploiting such opportunities requires a particular set of skills that many companies—even big companies—lack.

For example, there is a need to choreograph the actions of an ever more complex web of global suppliers, extracting value at every turn. “Knowing the cost of your operations . . . is not enough,” Drucker wrote in Management Challenges for the 21st Century. “To succeed in the increasingly competitive global market, a company has to know the costs of its entire economic chain and has to work with other members of the chain to manage costs and maximize yield.”

Andersson, who oversaw worldwide purchasing for GM, is especially well suited for this task. While at the Detroit company, he earned a reputation for his mastery over the details of a vast supply chain, as he pushed for more and more accountability from GM’s parts manufacturers. When an executive from one of them offhandedly accused Andersson of sucking his suppliers dry, he responded by donning a vampire costume.

But Andersson is far more Drucker than Dracula. For the past four years, he has spearheaded an impressive turnaround at Russian truck maker GAZ Group. He began by taking the necessary step of cutting tens of thousands of jobs (no simple thing in a country with a strong Communist legacy) and more recently started offering employees generous incentives (through a profit-sharing program). But while these moves have depended on a keen grasp of local politics and culture, Andersson has also kept an eye on the international scene, with GAZ becoming a contract assembler for GM, Volkswagen and Daimler’s Russian subsidiary.

Drucker saw this balancing act as a hallmark of business today—“the need to operate in both a global world economy and a splintered world polity.”

Finally, Andersson insists that all of his operations are truly first-rate, or are at least moving in that direction—another trait that Drucker deemed essential.

“No institution can hope to survive, let alone succeed, unless it measures up to the standards set by the leaders in its field, anyplace in the world,” Drucker wrote. “This is true particularly in manufacturing. . . . Performance below the world’s highest standards stunts, even if the costs are very low and even if government subsidies are very high.”

At GAZ, Andersson modernized factories, improved logistics and had his workers trained in the latest production techniques. At AvtoVAZ, he is sure to do the same.

If he rejuvenates the company—and it’s a good bet that he will—you can then forget all those old Lada jokes. Andersson, the globetrotter, will have had the last laugh.

CFMgroup6@Paris: Globalization of Health and Health Services

Globalization is transforming not only trade, finance, science, the environment, crime, and terrorism, it is also influencing health and medical care. In 1997, a report by the US Institute of Medicine stated, “Distinctions between domestic and international health problems are losing their usefulness and are often misleading.” Broad international contacts are not a novelty. What is new is the pace and range of integration.

We cannot underestimate the effects of these changes on the health of populations and medical care. In addition to domestic problems, all national health systems must now deal with the international transfer of health risks and opportunities.

The best example of the blurring of health frontiers is the dissemination of communicable diseases. In the 14th century, the Black Death killed one-third of the European population. The global spread of influenza in 1918 accounted for far more casualties than World War I. The most recent additions to the list of global epidemics include HIV/AIDS, SARS, and H1N1 or swine flu.

As we can see, infectious diseases have an old record of cosmopolitan presence. What is new is the scale of what has been called “microbial traffic,” which has expanded as a result of an explosive increase of trade and travel.

The global spread of infectious diseases is related to major changes in our environment and lifestyles. Indeed, to make matters more complex, it is not only people and plagues that travel from one country to another; unhealthy lifestyles are also being exported. Smoking and obesity are the exemplars of emerging health risks linked to globalization.

Furthermore, the globalization of health goes beyond diseases and risk factors to also include health products. Careful regulations on access to prescription antibiotic drugs in one country, for example, may be subverted when its neighbors allow the unrestricted purchase of antibiotics. Such practices are at least in part responsible for the emergence of new forms of resistance to many antibiotics. The most dramatic case is tuberculosis (TB). The latest World Health Organization (WHO) global survey indicates that 5 percent of the 9 million new cases of TB are resistant to first-line antibiotics.

Another recent development, with potential implications for imprudent prescription practices and the ensuing spread of antibiotic resistance, is the growing commerce of drugs through the internet.

International trade in health services is also expanding. The traditional classification of these services recognizes four basic forms of exchange: 1) service exportation; 2) commercial presence; 3) transnational movement of providers; and 4) transnational movement of consumers.

The exportation of health services implies the transborder movement of diagnostic or therapeutic procedures. WorldCare Limited, for example, based in Bermuda and with access to physicians from the Massachusetts General Hospital, Cleveland Clinic and Brigham and Women’s Hospital in Boston, is offering telemedicine services and second opinion consultations in several parts of the world.

Commercial presence—the establishment of health care units or services in other countries—is also growing as a result both of trade liberalization and the saturation of the American managed care market. Given that most of these organizations are for-profit, their growth has forced them to look for new markets in Latin America and Eastern Europe.

The international movement of physicians and nurses, mostly to the US and Europe, is expanding as well. In the US, foreign physicians are brought into the health system largely through clinical residency programs. The movement of nurses is more dependent on direct demand from the labor market. A large proportion of foreign nurses in the US come from Jamaica and the UK, but given the shortage of this kind of personnel and the growth of the Hispanic population in the US, the exportation of nurses from Central and South America is increasing.

Finally, the movement of health care consumers is also growing. Foreign patients regularly use the services of internationally renowned hospitals in the United States. Residents of American border cities, in turn, search for culturally acceptable services in Mexico, in the case of persons of Hispanic origin, or cheaper medical services, mostly dental and ophthalmological, which are not covered by regular insurance plans. American citizens from all over the country also travel to Mexico to access treatments that for regulatory reasons are not available in the United States.

A limitation to this type of exchange is the lack of portability of most public and private insurance plans in North America. However, NAFTA and other free trade agreements offer the opportunity of discussing the possibility of covering the costs of medical services offered in Mexico and other countries by providers willing to submit themselves to international certification procedures. These services tend to have a much lower cost than in the US. It is estimated that, in the countries offering this kind of service to American consumers, the cost of an average surgical procedure, such as hip replacement, hysterectomy, hernia repair, and cataract removal, amounts to 15 percent of the cost in the United States.

A particularly attractive possibility is that Medicare could cover the medical expenses of American retirees living in Mexico, who represent 15 percent of total American retirees living abroad. This is not only a potential source of foreign currency for Mexico but also a niche of enormous potential savings for Medicare. According to Professor David C. Warner, an expert in economics and health finance at the University of Texas at Austin, the cost to Medicare of an average beneficiary of this public insurance in the US is $7,500 a year. In Mexico, the medical care of an average beneficiary would cost $4,000 a year.

But this is not the only potential market for health care providers in low- and middle-income nations. In the US there are still roughly 40 million uninsured individuals. Many others are under-insured. This population is increasingly looking for value in health care through affordable quality services. According to the Deloitte Center for Health Solutions, in 2007, approximately 750,000 Americans traveled abroad to receive medical care. It is estimated that this figure will grow to 1.6 million by 2012. We are talking about a market worth several billion dollars annually. These resources will flow to those countries willing to offer accredited medical services at reasonable prices.

The exportation of health services by developing countries is also helping to solve the drain of local qualified health workers. The World Bank has recently documented how the establishment of private clinics and hospitals in Trinidad and Tobago catering to foreign consumers has stimulated the repatriation of a considerable number of physicians and nurses. A similar situation is taking place in India.

In conclusion, the global trade in health services is offering opportunities both for exporting developing countries and importing developed nations. The former can benefit from an increasing amount of foreign currency, an improvement in the standards of local medical care, and the repatriation of qualified health workers. High-income countries, in turn, can benefit from a reliable supply of services that are being offered at a lower price and with similar standards of quality.

Source: http://journal.aarpinternational.org/a/b/2010/05/Globalization-of-Health-and-Health-Services

Group 6 CFM @ How globalization will affect us throughout our professional career ?

« What do you want to be when you grow up? »

We all remember this question during our childhood. The question was somehow difficult to answer back then and even more nowadays. “With globalization we are all interdependent.” Said Joseph Stiglitz in 1943. We live in a small world where everything is just on our doorstep.

Indeed, globalization allowed the increase of the flows of merchandises, services, money… and more importantly, jobs since we will be facing it in the near future. In order to cope with the global competition on the labor market, it is crucial that we equip ourselves with the skills necessary.

Globalization will affect our professional career one way or another. Here is the “sixty-four-thousand-dollar” question: how are we going to take advantage of it? Followings are a few mainlines of our team vision:

1) On the one hand, we have to know all the tricks of the trade that we have chosen. It means that in a globalized world, knowledge makes the difference. We have to distinguish ourselves no matter what the job is. We have to become “experts” by building a strong academic background;
On the other hand, we have to make sure that our academic skills meet global industry and professional standards while receiving trainings throughout our career.

2) We need to be “adaptable” and “flexible”. It means that we have to be able to work in a multilingual, multicultural and multinational company. This teamwork is exactly the exercise that we need to prepare ourselves in a globalized working environment. Adaptability and flexibility are the key factors for developing our open-mindedness, our communication skills and technical skills.

3) We also need to take our courage in both hands and consider the possibility of changing our workplace many times. “Mobility” is an essential criterion since the earth became a “village” and everyone can go around the world within 24 hours. Now MNCs want to conquer new market shares on the five continents, considering that they’re no longer out of reach. However, MNCs need workers to achieve this objective.

To conclude, we can say that on the labor market nobody is fighting on equal terms. The ball is in our court if we want to be more competitive and to reap benefits from globalization.

Why globalisation is not reducing inequality within developing countries – group 6 CFM@Paris

DEFENDERS of globalisation often say that, whatever distress it may cause for rich-world workers, it has been good for poor countries. Between 1988 and 2008, global inequality, as measured by the distribution of income between rich and poor countries, has narrowed, according to the World Bank. But within each country, the story is less rosy: globalisation has resulted in widening inequality in many poor places.

This can be seen in the behaviour of the Gini index, a measure of inequality. (If the index is one, a country’s entire income goes to one person; if zero, the spoils are equally divided.) Sub-Saharan Africa saw its Gini index rise by 9% between 1993 and 2008. China’s soared by 34% over 20 years. In few places has it fallen.
Economists are puzzled: the data contradict the predictions of David Ricardo, one of the founding fathers of their discipline. Countries, said Ricardo, export what they are relatively efficient at producing. Take America and Bangladesh now. In America the ratio of highly skilled to low-skilled workers is high. In Bangladesh it is low. So America focuses on products requiring highly skilled labour, such as financial services and software. Bangladesh focuses on downmarket products such as garments.

Comparative advantage predicts that when a poor country starts to trade globally, demand for low-skilled workers will rise disproportionately. That, in turn, should boost their wages relative to those of higher-skilled locals, and so push down income inequality within that country. The theory neatly explains the impact of the first wave of globalisation. In the 18th century, Europe had a high ratio of low-skilled workers relative to America. When Euro-American trade took off, European inequality duly tumbled. In France in 1700 the average real incomes of the top 10% were 31 times higher than the bottom 40%. By 1900 (admittedly after several revolutions and wars) they were 11 times larger.

But growing inequality in developing countries leaves Ricardo’s disciples befuddled and suggests the theory needs updating. Eric Maskin of Harvard University has attempted just this at the Lindau Meeting on Economic Sciences, a get-together of economists in a Bavarian lakeside town featuring many Nobel laureates. (Mr Maskin won his in 2007 for his work on the design of market mechanisms, which economists use to improve regulation schemes and voting systems.)

Mr Maskin’s theory relies on what he calls worker “matching”. Unskilled workers can be more productive when matched with skilled ones—that is, when they work together. Assigning a manager to a group of workers can do more for total output than just adding another worker. He places workers into four classes: skilled workers in rich countries (A); low-skilled workers in rich countries (B); high-skilled workers in poor countries (C); and low-skilled workers in poor countries (D). Crucially, he thinks low-skilled workers in rich countries (the Bs) are likely to be more productive than high-skilled workers in poor ones (the Cs).

Before the current wave of globalisation started in the 1980s, skilled and unskilled workers in developing countries—the Cs and Ds—worked together. Mr Maskin gives the example of a rural Indian man, fluent in English, who helped local farmers understand modern agricultural methods. Wage growth of high-skilled workers (Cs) was weak, because poor transport and communication links made it hard for them to work with skilled workers in rich countries. But low-skilled workers (Ds) did well: their interactions with the Cs boosted total output, which let them demand higher wages, so pushing down inequality.

The latest bout of globalisation has jumbled the pairings: high-skilled workers in poor countries can now work more easily with low-skilled workers in rich ones, leaving their poor neighbours in the lurch. Take “intermediate goods”, the semi-finished products that account for about two-thirds of world trade. The production processes outsourced by big companies in factories or call-centres are by rich-world standards unskilled. But when jobs are sent offshore, they are snapped up by C workers, the relatively skilled ones. According to research from Cornell University, the typical call-centre employee in India has a bachelor’s degree.

Globalisation in its latest guise means such workers come into more regular contact with less-skilled people in the rich world. The Anglophone Indian cited by Mr Maskin may go to work in an export factory where he meets tight deadlines laid down by its American owners. The Cs work with Bs and end up being more productive. The Ds are left by the wayside.

D-graded workforce
The result of booming trade in intermediate goods is higher demand and productivity for skilled poor-country workers. Higher wages ensue: multinationals in developing countries pay manufacturing wages above the norm for the country. One study showed that in Mexico export-oriented firms pay wages 60% higher than non-exporting ones. Another found that foreign-owned plants in Indonesia paid white-collar workers 70% more than locally owned firms.

Globalisation, though, does not boost wages for all. The least skilled cannot “match” with skilled workers in rich countries; worse, they have lost access to skilled workers in their own economies. The result is growing income inequality.

Mr Maskin’s approach is not entirely satisfying. He does not offer data to back up his theory (such is the privilege of the Nobel laureate). “We need micro-data on matches between firms in developing countries to examine whether skilled workers benefit through the mechanism Mr Maskin suggests,” says Pinelopi Goldberg of Yale University. But if he is right, he poses a challenge to globalisation’s advocates: figuring out how to reap its rewards without leaving the least-skilled in poor countries behind.

Source: Economist.com/blogs/freeexchange