Group 11 IMBD Paris : Multiculturalism: Good for the Bottomline and Your Gateway to Global Markets

In today’s highly competitive, volatile global marketplace, the most recent census figures offer compelling evidence that U.S. corporations, in their aggressive pursuit of overseas markets for their products and services, may be overlooking a multicultural consumer market gold mine in their own backyards.

New population estimates were recently released by the U.S. Census Bureau showing that, for the first time, the majority of Americans under the age of one are minorities. Or more specifically that white, non-Hispanic babies now make up less than half of the population younger than one. It’s part of a demographic shift that’s expected to create a minority-majority nationwide population sometime within the next 30 or 40 years. California, Hawaii, New Mexico and Texas have already passed that threshold at the state level.

The ethnic landscape of America’s cities has also changed dramatically in the past decade. Twenty-two of the 100 largest cities are now minority-majority cities. These cities include Boston, Memphis, New York City, Las Vegas, San Diego and Washington DC. Whites were the majority in those cities just 10 years ago. Similarly, the white population has fallen even further in several cities that already had white minorities in 2004, such as San Francisco, Los Angeles and San Jose in California, as well as Miami and Houston.

Statistically, Blacks, Hispanics and Asians represent over 30 percent of the United States population. Research indicates that these ethnic groups are the fastest growing consumer groups in the country and that, contrary to popular stereotypes, they are brand loyal, have tremendous purchasing power, and are growing increasingly prosperous. Black, Hispanic and Asian consumers have a combined income of more than $4.4 trillion. And that is not chump change.

Multicultural consumers notice companies who notice them, rewarding them with their business, loyalty and support. As the American marketplace grows ever culturally and linguistically diverse, it’s clear that any company that does not actively pursue multicultural customers is leaving money on the table. Further, the economic clout of these diverse consumers will only grow: the census predicts that in less than 35 years, people of color will account for almost half of the nation’s population.

These compelling statistics make targeting culturally diverse and immigrant consumers an imperative for American companies. However, companies hoping to reach these fast growing emerging markets merely by “casting a wider net” will sell themselves short. Message exposure doesn’t necessarily mean message receptiveness, particularly in today’s disruptive digital media marketplace. Only by taking the time to understand the unique cultural sensibilities of diverse markets will companies compete effectively in the 21st century.

Carrefour China: Lessons From A Global Retailer

Carrefour’s hypermarkets in China are the Bosporus of retailing–commercial centers where East and West splash against each other. Tanks of live fish, eels, bullfrogs and turtles dominate the fresh food sections, while vacuum-packed strips of bacon and slices of pepperoni lie in refrigerated cases a short distance away. Modern formats mix with local tastes in the French retailer’s stores: Shoppers stroll down wide, brightly lit aisles, past displays of dried pork snouts and whole ducks hanging limply by the neck, as “Hotel California” plays on the speakers overhead.

Carrefour, whose name means “crossroads,” wasn’t the first foreign retailer in mainland China to open a hypermarket–a giant outlet that offers “everything under one roof,” from consumer electronics to groceries. [ Wal-Mart is also becoming interested in China.] But since Carrefour opened its first store, in 1995, it has become the largest. Today it operates 73 hypermarkets in 29 cities, from Urumqi (in the western reaches of the Middle Kingdom) to Harbin (near the Russian border) to Kunming (in the south). Carrefour also operates the Champion supermarkets and Dia convenience stores. Its 2005 turnover was about $2 billion (including value-added tax), making China Carrefour’s fifth-largest market. The company expects its sales in China to go on growing by 25% to 30% annually over the next five years.

Jean-Luc Chéreau, who came to the mainland after running the company’s business in Taiwan for seven years, has led Carrefour China since 1999. He recently met with Peter Child, a director in McKinsey’s Paris office, in his 25th-floor office in the Shanghai Stock Exchange building and discussed Carrefour’s hits and misses as it expanded beyond China’s largest cities.

The McKinsey Quarterly: What were your first experiences in China when you took over Carrefour’s mainland operations?

Jean-Luc Chéreau: When I arrived here, in 1999, the market was just beginning to open. We were in the main cities–Shanghai, Beijing, Guangzhou and Shenzhen–but not much in the others. I had only 17 stores in 6 cities. Step by step we increased the number of stores, and today we have 73 hypermarkets in 29 cities. We learned about the Chinese consumer by starting with the main cities on the coast and continuing into the rest of China.

In reality, though, we began our experience in China 18 years ago, in Taiwan. For the hypermarkets in the big mainland cities, we have exactly the same hypermarket style as in Taiwan. But as you enter middle and western China, there is a much less mature market. For example, 50% of the televisions offered in a store in Shanghai would be flat-screen TVs. When you go into the middle of China, it’s only 20% because today flat screens are too advanced and too expensive for those areas. For MP3 players, digital cameras and so on, it’s the same. The people are not able to buy, at least not enough for us.

How did your experience in Taiwan influence your activities in mainland China?

We discovered Chinese culture and the way to work with the Chinese in Taiwan when the retail sector in mainland China was totally closed. International companies that decided to enter Taiwan–not Hong Kong–15 or 20 years ago have a fantastic advantage in China, and that was the case for Carrefour.

For example, you learn how to adapt. When Carrefour arrived in Taiwan, we had a very clear picture of what we wanted to do–open a 10,000-square-meter store on the ground floor, with a big parking lot in front, just as in France. But it was impossible to do that kind of store. Then we tried something different: We opened a 3,500-square-meter store in a basement in Kaohsiung, Taiwan’s second-largest city, with 250 parking spaces for motorcycles. That was the beginning of Carrefour in Taiwan.

Another aspect was Chinese business dealing. When I arrived in Taiwan, my former boss told me I was lucky: I was set for the first year because he had already signed five contracts for five new stores. Then I started talking with one of our Chinese partners who had signed those contracts, and nothing seemed to be happening. Finally, my assistant told me, “Just because he signed a 20-year contract two years ago with your former boss–a person who is not you–does not mean he will respect the contract.” That was a big shock to me; the contract was notarized and everything. But we started to renegotiate article by article. Five years later, during the Asian crisis, I invited this same partner to my office and said, “Just because I signed a contract with you does not mean I will respect it. We are in a crisis.” So he said, “Fine,” and we started to renegotiate, to reduce the rent.

It was these very interesting experiences that showed me that we are in another world. If you come to China with preconceived ideas after having been successful in Europe or the U.S., you make mistake after mistake.

“The Big Mac Mirage”: America is actually terrible at globalization. 105@Sophia

Coke is so prevalent around the world that non-profits look to its supply chain for help on distributing aid. McDonalds, in 122 different countries, is so widespread that there’s a foreign relations theory that no two countries hosting the burger franchise will go to war, althoughthe strong version of that theory is well dead. And Wal-Mart is the world’s third largest global employer, after the American and Chinese militaries, respectively.

The US must be great at globalization, right?

Unfortunately, no, according to Bhaskar Chakravorti, the director of Tufts’ University’s Institute for Business in the Global Context. He says all these examples represent “the myth of American global market power”—they are outliers that disguise the real failing of American multinationals to succeed around the world, and especially in fast-growing emerging markets. Despite what you might hear, he says “we are extremely under globalized.” Here’s an excerpt from a forthcoming paper he’s written with fellow economist Gita Rao (emphasis mine):

In 2010, emerging markets represented 36% of global GDP; these markets already account for the majority of the world’s oil and steel consumption, 46% of world retail sales, 52% of all purchases of motor vehicles and 82% of mobile phone subscriptions. With two-thirds of global growth coming from these markets, in a decade they will account for the majority of the world’s economic value. Yet U.S. companies derived less than 10% of their overall revenues from emerging markets: about as little as 7%, according to HSBC estimates for 2010. The 100 largest companies from the developed world overall made 17% of their revenues from emerging markets, according to a McKinsey report; in other words, the U.S. lags not only emerging market firms in capturing share in emerging markets, but it lags the developed world overall. By considering the difference between the “absolute potential” represented by the 36% number or, to take a much more conservative benchmark, the global peer average of 17% and the U.S. share of 7%, we derive two measures of the gap – and the degree to which U.S. industry has not participated in global growth.

There are several reasons the US is being held back. Some are the intrinsic challenges of doing business abroad: Besides language and cultural barriers, there are underdeveloped supply chains, incomplete capital markets, corruption, etc. But European companies earn 25% of their revenues from emerging markets, so these must be surmountable. What’s America’s problem?

America doesn’t have a legacy of colonization. Despite a hefty history of foreign interference, the US didn’t set up the same deep linkages that Spanish and Portuguese companies did in South America or European countries have in Africa or South Asia. Chakravorti, who was a McKinsey executive for many years, recalls European competitors in Africa asking, “What are you doing in Africa? Africa belongs to us.” Meanwhile, he says, “the executives I was working with had no understanding of the socio-cultural context of the continent.”

America is actually pretty insular. Because it’s a big country, and has had many decades of consumer-driven growth, US businesses haven’t necessarily had to look over the horizon for new opportunities. After the 9/11 attacks, Chakravorti says, things got even worse, and most businesses stayed home. It doesn’t help that less than 20% of Americans speak a language other than English, while 56% of Europeans speak a second language.

American business is all about standardization. Companies get economies of scale from selling the same product, but many emerging markets are stratified and require different products and price-points in the same country; while American executives want a  “Brazil strategy,” what they really need is a strategy for Sao Paulo state and another for more rural areas.

Chakravorti argues that American companies do have what it takes to surmount these challenges, and they’ll need to if they want to bring more growth back to the US.

His strategy starts with a focus on sectors where America can compete abroad but isn’t taking full advantage of the opportunities, particularly in consumer products and large-scale services such as education, elder- and child-care. American companies need to start thinking about tailoring their strategies to demand abroad—particularly at the bottom of the pyramid— but the market can’t do it alone: The government needs to work more closely to tailor its foreign policy to America’s commercial needs while opening education to a more international view.

“That gap has been closed completely in China, because the most powerful companies are state-owned,” Chakravorti says. “We are still talking about the Asia pivot as though it is something dramatic and new, while China has been pivoting for a while.”


McDonald’s withdrawal from Bolivia: capitalism in action

BBC World’s Latin America section has provided a sympathetic review of a Bolivian documentary titled ‘¿Por que quebró McDonald’s en Bolivia?’ (Why did McDonald’s fail in Bolivia?), which celebrates the departure of McDonald’s from the country. The review adopts the documentary’s overtone, which interprets the Bolivians’ lack of appetite for lukewarm hamburgers as a victory over global capitalism. ‘Culture has won against a transnational [corporation], against the globalised world’, rejoices the movie’s director Fernando Martínez.

It is a strange topic for a documentary, if you keep in mind what the basic storyline is:

  1. A company offers a product.
  2. Consumers don’t want it.
  3. The company leaves the market. End of story.

Does this sound vaguely familiar? That’s because it is the most ordinary and mundane occurrence in a market economy. While you’re reading this, several pubs in London are closing, even though there won’t be a documentary celebrating the people who brought down the mighty pub.

BBC World seems to believe that that buying an empanada from a local street vendor was somehow ‘less capitalistic’ than buying a burger from McDonald’s and that a country without McDonald’s restaurants is less capitalistic than a country with them. This clearly confuses distinct categories. Is buying a hamburger more capitalistic than buying a cheeseburger? Is a beef empanada more capitalistic than a chicken empanada?

Not quite. Broadly speaking, a country is capitalistic to the extent that its government respects the principle of consumer sovereignty, as in the freedom to choose between the local empanada vendor and McDonald’s. On this account, Venezuela, where the government frequently bullies private companies like McDonald’s, is less capitalistic than Bolivia, despite still being full of McDonald’s branches. Bolivians were never prevented by their government from buying burgers; they simply chose not to do so. This is not a victory over capitalism, it iscapitalism.

Presumably, the documentary will be successful on Western campuses, among the anti-globalisation crowd armed with their Naomi Klein books and Tobin Tax flyers. It should not be. If they are smart, they should maintain funereal silence about it. Far from supporting their case, it undermines it.

Since the late 1990s, the anti-globalisation movement has been telling us that Western corporations were like alien invaders, who march into helpless poor countries to stamp out fragile indigenous cultures. The Bolivian case exposes that imagery for the nonsense that it is. If people don’t want to buy hamburgers (or any other foreign product), there is nothing McDonald’s (or any other foreign corporation) can do about it. Nobody has ever been forced into a McDonald’s at gunpoint.

Hence, Western corporations retreating from developing countries is an everyday phenomenon. Just a year ago, the French supermarket chain Carrefour decided to pull out of Thailand and Malaysia, where it had opened 67 stores. Their Asian stores were largely clones of the French ones, an expansion strategy that worked well within Europe, but not beyond. Tesco, in contrast, took a more sensitive approach, teaming up with local suppliers to build up local knowledge step by step. It worked.

It is ridiculous to assume that Western corporations can force people to buy products which are an affront to their cultural identity. Anti-globalisation campaigners, who call upon governments in developing countries to insulate their citizens from foreign influence, are imperialists with reverse signs. Traditional imperialists wanted to force Western norms upon other peoples. Today’s imperialists want to stop other peoples from adopting Western consumption norms. It would spoil the authenticity of their backpacker trips.


Group101 @Sophia: How does the multiculturalism triggered by globalization impact on the companies Human Resources management?


1) The multiculturality triggered a structural shift in the HR management systems

2) The HR Management is now adapting to an ever changing environment

3) Is this situation stable or will it lead to a new paradigm of the HR Management?



Globalization 2014-2030: how will it impact our gameplan ?

According to the Cisco Connected World Technology Report 2012, 90% of Generation Y or « digital natives » check their emails, texts and social media accounts using their smartphones before they even get out of bed.

This hyper connected world is today’s reality. Across every industry, companies are discovering new audiences, creating new revenue streams, inventing new business models, expanding and accelerating their business at an impressive pace. Internet has become the channel for growth and innovation. The explosion of international business and the boom in urbanization has encouraged ever-faster transportation systems hence extreme mobility.

Globalization has led to new forms of consumption and consumerism. 
Consequently, the professional environment and job market one will enter is highly international and competitive. Indeed to make a difference, one has to embrace this dynamic, international, global world where boundaries are shortened, individuals are multicultural, management methods are divers and new forms of work arise e.g. cyber-workers. Hence the importance of developing key competences such as adaptability, flexibility and multi-tasking for example.

This global, urban age has also undermined a new economy of knowledge. Ivy leagues are flourishing throughout the world, shaping more and more international, qualified future managers, scientists and workers. Just in 2013 for example, China has delivered 1,3 millions engineer diplomas.

Overall, no one can enter the present international job market coping this global, hyper connected world.