Years of Poems and Spirits

I first touched upon the risks and difficulties of International Business in an earlier article.

It was a paper based on the case study of Rolls-Royce. My argument was because RR is doing “infrastructure-class” business, the vendor-customer relationship is inherently “asymmetric”.

Just read an article in NYT that further illustrate my point.

The article mainly discussed corruption and the mess it created after the original corrupt regime was replaced with a new one that is now demanding U.S. to compensate for the State’s lost revenues. This is only made more interesting because after lossing its Uzbek bases, Kyrgyzstan is becoming more important to the U.S.

Some highlights:
Soon after the American invasion of Afghanistan in late 2001, the Pentagon opened an air base in neighboring Kyrgyzstan and made a deal to get jet fuel from the only two suppliers in the country. The companies just happened to be linked to relatives of the country’s president.

Mr. Akayev’s abrupt departure in March has put the Pentagon in an awkward bind. It needs continued access to the base, but the $207 million spent on fuel contracts has created resentment among the country’s new leaders, some of whom contend that the United States knew where the proceeds were going.

The current president, Kurmanbek Bakiyev, is insisting that the United States make retroactive lease payments of $80 million and help recover the contract money …

But Pentagon officials say the demand amounts to asking them to pay twice for use of the base for the last four years. “Any possible misappropriation of funds is an internal Kyrgyz matter,” a Pentagon spokesman, Bryan Whitman, said in a statement.

The fuel deals have become a liability with Kyrgyzstan’s new leaders at a time when the American military needs the base more than ever.

Question:
1. Would things be different had Nike owned the factories?
— because Nike did not want to deal with Union and other local headache, maybe
2. Is this case about labor practice or corporate citizenship in general? Is there any apply-to-all “code of conduct” for corporations?
— the former easier to answer/judge. The latter much complicated. Racial/religious tolerance: suppose labor practise was not a problem but Nike had factories in Bosnia or Somalia. Freedom of Press/Speech: Yahoo! China case.

Other thoughts:
1. Nike enjoyed incredible growth in the 80s and 90s: 15,000,000% revenue according to the case

2. Phil Knight was ahead of his time: 60s, MBA. A brilliant business genius.

3. Nike epitomize the Globalization process: its poster boy and its piñata.
a. Poster boy: the phenomenal growth; others’ imitation; leader of the fashion and pop culture; seemingly transcendant of both streets (Wall and Main)
b. Pinata: Attacks on Nike were emotional/visceral, not necessarily rational. Attacks were coordinated, focused and lasting. NGOs were less interested in co-opting Nike than ridiculing it.

4. The impact of FDI to local economy and social life:
a. Overall beneficial. Backed up by Tuck study in 1997.
b. Empirical data implied in the case: the dev. path of “Asian Tigers”. Without initial exploitation, Taiwan and Korea may not be able to become who they are now.

5. The role of NGO
a. Passions of Crusaders (Jeff Ballinger living in basement and single-handedly brought the Nike abuse to light)
b. Different agendas within NGOs: Ballinger’s human rights concern, AAFLI/AFL-CIO’s goal.
c. As a result, NGO’s are good at bringing up abuse cases, not always good at constructing solutions. Some are suspected of disruptive tactics and promoting own agenda. e.g. Columbia University professor Jagdish Bhagwati’s general critique of NGO in his article.
d. Anarchical elements in anti-globalization movements: the Seattle protests. Reduced the effectiveness and moral credentials of good NGOs. May also explain why they couldn’t agree on FLA issues.

6. Nike’s Response to the Challenge
a. CEO lack of sensitivity to the issue. As a result, lacks conviction, vision and decisiveness. Unbecoming his role of a leader in globalization
b. Knights’ business model was absolutely cutting edge but view of labor and HR was hopelessly mercantile: I don’t have to know how the profits come, as long as they come.
c. Still lacks of sincerity: pre-notification of an inspection: what the heck was that?!
d. Improved a lot by proactively organizing and coercing smaller players into FLA. Gaining tractions, aiming small: a valid, business-like approach.
e. Damage done to Nike’s image/brand appeal/value: Long term, intangible, no question detrimental. Corporate arrogance, “swooshtika“, expose business to competition and during down turn.
d. Compare what Reebok’s pre-emptive, overwhelming response. Good example to follow.

While I am surfing the Net, found this article:
“H-1B visas may grow by half”
http://news.com.com/H-1B+visas+may+grow+by+half/2100-1022_3-5906852.html

Highlights:
Senate Judiciary Committee approves boosting the number of H-1B visas for highly skilled guest workers from 65,000 to 95,000

The measure is supported by US employers (Information Technology Association of America, which counts IBM, Microsoft and Oracle among its members) but opposed by US employees (IEEE-USA, which represents high-tech professionals)

IEEE-USA claims H-1B workers are underpaid.

The demand for H-1B is high: For the past two years, the annual limit was met just as the new fiscal year began. Last year, that prompted Congress to approve a boost of up to 20,000 visas for foreigners who receive master’s degrees or higher from American schools.

Questions:
Why there is still such high demand for H1B if outsourcing becomes more viable?
Does it have something to do with the hidden cost of outsourcing?