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Course structure

Course structure. Classes 1-4 Classes 5-9 Class 10 Classes 11-14. International business environment Regional vs. global Triad and IB activities Politics, culture, trade and finance. Firm-specific advantages and firm management Organization Production Marketing International HRM

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Course structure

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  1. Course structure Classes 1-4 Classes 5-9 Class 10 Classes 11-14 International business environment Regional vs. global Triad and IB activities Politics, culture, trade and finance Firm-specific advantages and firm management Organization Production Marketing International HRM Political risk management International financial management Country-specific advantages Locational choice and regional management European Union, North America, Japan, and Emerging Markets

  2. China, P.R. (中华人民共和国) The Chinese name of China, 中国, means the Middle Kingdom

  3. China

  4. China’s grand “Going out” strategy (cont’d) • Two overall objectives: • 1) to help Chinese firms become more competitive internationally • 2) to assist China in its domestic development effort

  5. China’s massive reform 2013 • Market reform • Starting in 1978, then-paramount leader Deng Xiaoping started economic reform away from Maoism and the Soviet-style planned economic system. Deng’s reform was a hybrid process, balancing political pressure from the Communist Party of China and the economic goals of modernization. • In fact, Deng introduced competition and privatization into the market while maintaining an autocratic political system, which China terms “the socialist market economy”. • Source: Victor Z. Chen (2009) Hybrid enterprises in a hybrid economy. Asia Pacific Foundation of Canada research report.

  6. China’s massive reform 2013 • Enterprise reform • In1993, the government under Pres. Jiang Zemin launched the long-term privatization of state-owned enterprises (SOEs), which was officially announced and termed corporatization reform (to avoid the political sensitive phrase “privatization”. • The privatization process was supported by the two major stock markets in China – Shanghai SE, established in Dec 1990, and Shenzhen SE, established in July 1991. • Foreign strategic (long-term-oriented and institutional) investors were allowed since 1992. • Source: Victor Z. Chen (2009) Hybrid enterprises in a hybrid economy. Asia Pacific Foundation of Canada research report.

  7. China’s massive reform 2013 • Enterprise reform • The privatization reform accelerated after China joined World Trade Organization (WTO) in 2001. • Although not all SOEs are listed in the stock markets, most SOEs have sold their assets to private owners via management buy-out, etc. However, the privatization process has been very partial, and most firms are hybrid. • Source: Victor Z. Chen (2009) Hybrid enterprises in a hybrid economy. Asia Pacific Foundation of Canada research report.

  8. New leadership, new reform • Jinping Xi took the positions of the General Secretary of the Communist Party of China (CPC) and the chairman of CPC Central Military Commission from Jintao Hu in 2012 • Xi further took the position of the President of the People’s Republic of China in 2013. • He is also the ex officio chairman of the CPC Politburo Standing Committee, China’s de facto top decision-making body. The committee’s total number of members reduced from 8 under Hu to only 7 under Xi, suggesting a more politically concentrated leadership in China since 2013.

  9. Xi’s new reform plan • Partially because of a more concentrated political leadership, Xi is able to mobilize allies and put forward a bold reform plan. • Xi’s new reform plan was disclosed on November 15, 2013 at the Third Plenary Session of the 18th CPC Central Committee, and includes four major areas: • Social equality • Economic dividend • State-owned enterprises • Political stability

  10. Xi’s new reform plan • Social equality • Background: there are currently over 27 million migrants from rural areas into cities in China; about 10 million new migrants in 2012. • Include rural residents migrating into small towns and small cities fully into the Urban Housing and Social Security System to end discrimination against them in education, healthcare and other social services. • Grant farmers more property rights to their lands. • This requires not only to open migration policy in mid-sized cities but also to control the size of big cities (e.g., some cities have 10s of millions of residents) • Source: Financial Times China http://www.ftchinese.com/story/001053487.

  11. Xi’s new reform plan • Economic dividend • Allowing rural residents to migrate into the cities can release the rural land for commercial development • Release the One Child Policy to Two Children Policy • “Aging before being rich” problem • Lack of public service to take care of the seniors • Source: Financial Times China http://www.ftchinese.com/story/001053487.

  12. Xi’s new reform plan • State-owned enterprises (SOEs) • Market should be the definitive force in pricing • Reduce the unfair competitive advantages of SOEs • E.g., stop the cheap sourcing of raw materials, public services, and credit • SOEs should pay 30% of their profit to the government by 2020, compared to only 10-30% currently or de facto 0. • Source: Financial Times China http://www.ftchinese.com/story/001053487.

  13. Xi’s new reform plan • Political stability • No need to reduce the role of CPC Committee in enterprises • Every SOE has a CPC Committee • More and more private firms have CPC Committees • No intention to build independent judicial system • No intention to allow news media liberty and political democracy • Source: Financial Times China http://www.ftchinese.com/story/001053487.

  14. Next 11 (N-11) • Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea and Vietnam – identified by Goldman Sachs and its chairman of asset management, economist Dr. Jim O’Neill, who also coined the term BRIC. • MIKT (Mexico, Indonesia, Korea, and Turkey) made up about ¾ of the GDP of N-11.

  15. Next 11 (N-11) • Large, growing, young and diversified population • Contributed largely into global GDP growth • Relatively unaffected by the global credit crisis • Consumption-driven domestic GDP growth, particularly in luxury goods consumptions

  16. N-11 & BRIC overtaking G7 • Source: Goldman Sachs Global Economics Paper No. 153.

  17. Keys to emerging-market success • Source: Shankar, Ormiston, Bloch, Schaus and Vishwanath (2008). How to win in emerging markets. Sloan Management Review, 49(3), 18-24.

  18. A review and Q&A for final • Final exam: • Friday, December 13, 2013@Friday #142 • 8-10:30am for the morning session • 2-4:30pm for the afternoon session • Early make-up: • Wednesday, November 27, 2013@Friday #242 • 9-11:30am for both sections

  19. A review and Q&A for final • Final exam • A regular-sized, double-sided cheating sheet is allowed + pen/pencil + non-programmatic calculator. • 35% out of 100% • Part 1: Single choice questions • 1% x 15 = 15% • Part 2: Short essay questions • 5% x 4 = 20%

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