Passport to international business

How will you compete in a globalized world? The process of globalization is making the world smaller, closer-- maybe even flatter -- and is opening up many new opportunities for young university graduates. As you look at your educational choices, ask whether you will be obtaining the skills and knowledge to take advantage of¹ these exciting new possibilities. Below, you will find several puzzles that will introduce just a few of the different areas of business expertise required of modern managers. With these puzzles, you can test your knowledge and see where you still need to refine² your skills. Answers to all the puzzles can be found on the web at http://www.unva.cz/answers.htm.

Communication Puzzle: 

Miscommunication is the cause of many failures in international business. Research continually proves and reproves this point, yet most businesses still make the same mistakes. The globalized world may erase many barriers and soften others, but there is little to suggest that it will eliminate our cultural differences— and our cultural differences are what so often give rise to miscommunication.

English has become the international language of business, but when marketing products and services it is the local language of the target market that is most commonly used. Many amusing³ cases prove that translations to or from English can be fraught⁴ with danger.

When the Chevrolet division of GM decided to sell its popular ‘Nova’ car model in Central and South America, they overlooked something very important: namely, its name. In Spanish, ‘Nova’ can also be pronounced as two words “no va,” which means, “does not go.” It was a bad name for a car— as bad sales results clearly demonstrated.

The Pepsico company advertised in Taiwan with the slogan “Come Alive With Pepsi” without realizing that their marketing phrase had been translated as “Pepsi brings your ancestors⁵ back from the dead.” Across the strait⁶, Pepsico’s biggest rival, Coca-Cola, had its own problems. In China, Coca-Cola was first translated as ‘Ke-kou-ke-la,’ meaning, “Bite the wax tadpole⁷.”

Even nations that use a common language sometimes find that words have different meanings. U.S. and British negotiators found themselves at a standstill when the Americans proposed that they “table” particular key points. In the U.S. to table a motion means to postpone the discussion, while the exact same phrase in Britain means to bring it up⁸ for discussion immediately. You can imagine the ensuing⁹ confusion.

Test yourself:

1. Pillsbury, an American food producer, has as its vegetable mascot the ‘Jolly Green Giant.’ In Saudi Arabia this was translated as ‘Forceful Green Ogre.’ How would you translate ‘Jolly Green Giant’ and ‘Forceful Green Ogre’ into Czech and what differences can you identify between the original and the translation?
2. The following sign was found in a hotel in Norway: “Ladies are asked to please refrain from¹⁰ having babies in the lobby.” What does this actually mean? How would you construct the sentence to read as the hotel intended¹¹?
3. “We execute all our customers in strict rotation” was a sign aimed at English speakers in a Greek bank. What message do you think the sign was intended to convey¹²?

 Finance puzzle: 

John Galbraith, one of the greatest finance specialists of the 20^th century, often joked that he classified financial forecasters into two groups: “those that don’t know, and those that have no idea that they don’t know.” Galbraith distrusted those who claimed to be informed, but who did not understand the limits of their knowledge. He was a strong proponent¹³ of good financial education.

Understanding finance is a very important part of any manager’s business skills. An appreciation of how money works, how interest rates¹⁴ operate, how exchange rates¹⁵ and money markets function, and how debt can help businesses grow is essential. A proper grounding¹⁶ in basic finance issues, such as exchange rates, is a good foundation for a better understanding of the more complex hedge funds, risk management, as well as options and futures.

Fluctuation¹⁷ in currency value is clearly an issue to which international business managers must pay special attention. On January 1^st 1999 when the Euro was first introduced as a common European currency it was valued at $1.18. By the end of June 1999 the value of the Euro had depreciated¹⁸ by around 12.6% to around $1.03. Later in 1999 the Euro dipped below $1.00. Now the value of the Euro stands at around $1.27. 

As tourists we can watch the fluctuation of currency and, when traveling abroad, are happy when we get a little bit more money for our crowns. Maybe we can buy an extra beer or two with the difference. In business, the changes are much more critical¹⁹.

Consider what would happen if an American importer orders €1,000,000 worth of laptop computers from a Dublin-based producer with a delivery date that is two months from the date of the original order. During the two-month lag²⁰ between the order being made and the delivery of the laptop computers, the Euro goes from its current $1.27 to $1.30. Surprisingly, such a small fluctuation would cost the importer $30,000.

What steps might the importer take if he thinks that the value of the dollar will fall during the period between the order and the delivery? The obvious step would be to pay the €1,000,000 when the order is placed and not wait until delivery is made, but what if the importer doesn’t have that much cash on hand²¹, or needs to borrow some of the money, or doesn’t want to pay an extra two months interest? There are banking instruments, such as forwards, futures and options which could reduce this risk.

Test yourself:

Consider a Czech electronics importer who places an order for digital cameras with a Taiwanese exporter. The digital cameras are 4-megapixel, compact, point-and-shoot²² models. The importer wishes to sell them with a retail price²³ target of 3500 CZK. The cost of purchase from the exporter is $80 each for 1000 digital cameras. The total shipping costs are $7000. The importer must consider the cost of re-packaging (with Czech language instructions) and appropriate stickers and labels, a total cost of 65.000 CZK. If the exchange rate between the CZK and the USD was 22.5 at the time when the order was placed, what would happen to the importer’s profit it the rate changed to 24.0? Is the suggested selling price of 3500 CZK still appropriate? If the importer wants to make a profit of 50%, how much would he need to charge the customer? Would people still buy the cameras if you raised the price?

Strategy Puzzle: 

In the modern business environment managers must pay close attention to technological developments, taste²⁴ trends, and up-and-coming²⁵ small businesses with competitive products. This has led to interesting acquisitions²⁶ and cooperative arrangements. In the electronics industry, SONY entered a joint venture²⁷ with Ericsson to leverage²⁸ their management and technological know-how with the intention of taking on²⁹ companies such as Nokia. Consider the Internet service provider America On Line (AOL). As a leading Internet service provider in North America and many other parts of the world, the company knew that it needed more content³⁰ to satisfy its worldwide customer base. To meet this need, AOL found a partner in Time Warner, the film and television production company. The AOL-Time Warner merger was not a success, but it anticipated a key strategic trend: the integration of content with technology and service providers.

In the past few months, American telecommunications companies have begun to bundle³¹ content into their broadband³² subscription services. For a small surcharge³³ you can get unique TV, news and sports content which is not openly available on the Internet.

The galloping³⁴ growth of the Internet in the second half of the 1990s led to what we now see to have been unrealistic expectations and vast over-investment. It was thought that the demand for bandwidth³⁵ was exponential. Hundreds of millions of dollars were invested in laying down fiber optic cable across the world’s oceans. This left a huge excess³⁶ of bandwidth capacity. Telecommunications and Internet companies had rightly seen an important market in bandwidth but by over-investing, they dramatically reduced its value. Consumers and businesses saw their costs drop as telecommunication companies saw their profits disappear. When the so-called Internet bubble³⁷ burst, many companies were left bankrupt, and others were forced to search for a new business model.

Cheap and fast Internet access opened the door for new technologies like VoIP (Voice over Internet Protocol), which now challenge the traditional telecommunication industry models. At first, routing³⁸ calls over the Internet was a way for telecom companies to reduce their costs. But now, with programs like Skype, calls made from computer to computer are, in effect³⁹, free of charge.

Mobile phone services seem to be safe, but probably only for the moment. They too face serious challenges in the near future. The introduction of Nokia’s E series will allow both wireless broadband access (Wi-Fi) and GSM network access. T-Mobile plans to introduce a service that would allow VoIP calls from wireless hotspots. New players are also getting into the fray⁴⁰ as Internet service providers sense an opportunity. Volny is introducing a VoIP service for mobile phones which will allow free calling from Wi-Fi hot spots.

The boundaries between the telecommunication, Internet, and media content companies are blurring⁴¹. The strategic question for each is: what to invest in? Should these companies focus on infrastructure, content, or services?

Test yourself:

The Czech Republic has attracted a great deal of foreign direct investment. All three of the mobile telephone service providers are now foreign-owned: T-Mobile (Germany), Eurotel (Spain), and Vodaphone (England). Foreign telecommunications companies have been attracted to the Czech Republic because the market is one of the densest⁴² and most lucrative in the whole of Europe. Almost everyone has a mobile phone, and many users are willing to experiment with new services beyond basic calling and text messaging. In the early 1990s mobile phones were used almost exclusively as a means to talk with friends, clients, or business partners, but now they are entertainment centers, scheduling aids, and indispensable⁴³ business tools.

Soon we will have a ‘television on your mobile’ service. This service, known as DVB-H or Mobile TV, is scheduled to be introduced in the next two years. One question is whether each company will continue to maintain its infrastructure alone, or try to cooperate with other operators and differentiate in the area of content and service. Cooperation between the operators is not unknown. The GSM network in parts of the Prague Metro is the result of a cooperative effort.

As Wi-Fi access becomes more widespread, people may start to use that service more than GSM. What steps could T-Mobile, EuroTel, and Vodaphone take to meet the new challenges they may face? Are there ways that the companies could cooperate? Should they be looking for partners in other complementary⁴⁴ industries? Where might mobile telecommunications companies see their biggest competition in the next decade? Is there room for a fourth mobile telephone service provider in the Czech Republic?

No one can claim to see into the future, but the best managers and leaders are those who can spot trends, who have the skills to make necessary changes, and who possess a wide scope⁴⁵ of expertise. These are skills that can be learned and refined with the right sort of education. How do your answers to the puzzles above compare with those of an expert? Have a look at www.unva.cz/answers.htm to find out.  

Glossary

¹take advantage of  - využít co

²refine – vylepšit, vytříbit, zdokonalit

³amusing – zábavný, humorný

⁴fraught – plný čeho

⁵ancestors - předci

⁶strait –úžina, průliv

⁷tadpole - pulec

⁸bring up – předložit, navrhnout

⁹ensuing – následný, následující

¹⁰refrain from –zdržet se

¹¹intend – zamýšlet, mít v úmyslu

¹²convey – sdělit, oznámit

¹³proponent - zastánce

¹⁴interest rates – úroková míra

¹⁵exchange rates – směnný kurz

¹⁶grounding – průprava, základní vědomosti

¹⁷fluctuation - kolísání

¹⁸depreciat – klesnout v ceně, znehodnotit

¹⁹critical –zásadní, důležitý, rozhodující

²⁰lag –interval, prostoj

²¹have on hand – “mít po ruce”, mít k dispozici

²²point-and-shoot – automatický

²³retail price – maloobchodní cena

²⁴taste - módní

²⁵up-and-coming – slibný, nadějný

²⁶acquisitions –  akvizice, přírůstek

²⁷joint venture – společný podnik

²⁸leverage – zefektivnit

²⁹taking on - soupeření

³⁰content – obsah

³¹bundle - spojit

³²broadband – vysokorychlostní (internet)

³³surcharge - příplatek

³⁴galloping - bleskový

³⁵bandwidth – propustnost

³⁶excess – nadbytek

³⁷internet bubble – internetové spekulace

³⁸routing - směrování

³⁹in effect – ve skutečnosti

⁴⁰fray – boj (konkurenční)

⁴¹blurring – stírající, zastírající

⁴²densest - nejhustší

⁴³indispensable – nepostradatelný, nezbytný

⁴⁴complementary – doplňkový, alternativní

⁴⁵scope - rozsah