Has OIobaIIzatIon IeIt AIzIca In the nazgIns?
BIIIy C $Ichone
International Business Billy C Sichone 2
Contents Contents Contents Contents
List of appendices 7
Situational analysis/Overview 10
Importance of study 16
International Business Defined 20
Studying International Business Challenges 37
Cardinal prior data 42
Established Regional Economic groupings 54
Essential marks of an international merchant 64
Direct Foreign investment investigated 72
Hurdles faced by International individuals 68
Types of international workers 84
International Business, present and in future 62
Chapter 8 89
Chapter 9 102
International Business Billy C Sichone 3
Chapter 10 106
Chapter 11 110
Chapter 12 115
Appendix B 140
Appendix C 174
International Business Billy C Sichone 4
If I were to list all the people that helped in generating this work, I
would need many volumes to do so but suffice it to say that I am
indebted to all those that toiled with me either physically or
emotionally during those long, weary, sweaty and lonely hours as I
plucked information from the “Data tree”. Many times, I felt like
giving up but the gentle whisper of encouragement kept me going.
Special thanks Chikondi & Anne Phiri and Marlon & Bupe Banda
who have always believed that I could make it even when the chips
were down. It goes with out saying that the backbone of my studies
has been the shining one, Jane Msimuko...
As I have grown older, I have become increasingly aware that my
parents have played a major role in spurring me on in my quest to
reach the highest orbs, I salute them uniquely. Others too
numerous to mention are equally saluted.
On then academic front, it would be unjust to claim originality in
many assertions and conclusions I have drawn in this work as
many of the initial thoughts are derived and triggered from various
sources such as books and individuals. I must also state that all the
errors in this book remain mine.
To all those people and sources, I say thank you.
Billy C Sichone
International Business Billy C Sichone 5
DcoicATioN DcoicATioN DcoicATioN DcoicATioN
To the apex of my joy-Jane and Zevyanji
I cherish you very much
To my parents, who impressed upon me from youth
that this dark world only applauds winners and afflicts
International Business Billy C Sichone 6
1. AIDS - Acquired Immunal Deficiency Syndrome
2. AU - African Union
3. CIDA - Canadian International Dev. Agency
4. COMESA - Common Market for East and South Africa
5. CSO - Central statistics office
6. DRC - Democratic Republic of Congo
7. FDI - Foreign Direct Investment
8. ECOWAS - Economic Community of West African States
9. GIS - Geographical information systems
10. GRZ - Government of the Republic of Zambia
11. GMO - Genetically modified organism
12. HIV - Human Immune deficiency Virus
13. IGO - Inter-Governmental Organization
14. IT - Information Technology
15. IB - International Business
16. MIS - Management Information System
17. NGO - Non-Government Organization
18. NEPAD - New partnership in African development
19. OAU - Organization of African Unity
International Business Billy C Sichone 7
20. PhD - Doctor of Philosophy
21. SADC - South African Development Community
22. SWOT - Strengths, weaknesses, opportunities, Threats
23. SRC - Self reference Criterion
24. WVI - World Vision International
25. WVZ - World Vision Zambia
26. WVC - World Vision Canada
International Business Billy C Sichone 8
LIst oI appendIces
a. The Mongu rice & fish
b. The race to Mongu-Buses
Other case studies
International Business Billy C Sichone 9
Credits Credits Credits Credits
8ince I do not cIaim 100º originaIity in thia work, I feIt atrongIy
that I needed to give credit where it ia due. Two authora heIped me
a great deaI nameIy;
Cateora PhiIip R, InternationaI Marketing 9
edition. 1996 McGraw
Charles Hill, International Business, 2001
Copy right © 2003
Billy C Sichone
All rights reserved. No part of this publication may be reproduced, stored in
a retrieval system, or transmitted in any form or by any means, electronic,
International Business Billy C Sichone 10
digital, mechanical, photocopying, recording, or otherwise, without prior
written permission of the copyright owner.
The paper upon which your eyes now peer results from the
resilient and relentless labours of an ant like cohesive team that
diligently laboured to produce it. In many senses, it is a synthesis
of the plethora of books already dealing with the subject of
International Business (IB). International business is impossible to
ignore any more as every one is affected, from the peasant farmer
in Shangombo district (Rural Western Zambia) who hardly has any
tangible wealth to the bwana
whose neck can hardly be
differentiated from the head due to the countless fat folds on the
neck! Some people spend half their lives on the surfing, buying
and selling on the Internet while others tread the deadly path of
crossing rivers while balancing in a canoe all night! All these are in
some way involved in International business because the product
of their labours affect some sector of the world economy in one
way or other, no matter how insignificant. Thus, this research
paper seeks to bring together the various facets connected in
carrying out IB so as to finally fetch a good price leading to
In coming up with this volume, the author has traversed far and
wide in search of valuable data. In doing this, various methods
were employed but the chief of them was reference to the countless
parchments out lying out there. This work is divided into two parts
with various chapters and then crowned with a number of case
studies largely generated by the author to further consolidate the
work. It is the hearty prayer of this writer that the work will prove
“Bwana”- refers to a Wealthy comfortable person
International Business Billy C Sichone 11
a tangible reference manual for pilgrims yet to come along this
path that we now tread, although the business conditions and
context will have tremendously altered by then.
Now unto Him that called us be eternal praise, Amen!
Billy Chilongo Sichone
International Business Billy C Sichone 12
Part ¡ Part ¡ Part ¡ Part ¡
CHAPTFR 1 CHAPTFR 1 CHAPTFR 1 CHAPTFR 1
The imperative need to study international business hardly needs
any introduction. This volume puts together some aspects that
compound to make up the successful contemporary international
businessperson regardless of gender, location or status. A complete
mental paradigm shift is inevitable. It is hoped that this will be a
worthwhile study. In this book, International Business (IB) and
globalisation are used inter changeably though strictly speaking, a
distinction can be drawn. For us to appreciate the issue at hand, i.e.
the alleged marginalisation of Africa in IB, it is prudent to expound
IB to some degree so as to give a good background upon which to
handle various issues emanating from there. The issue at hand can
no better be described than in the words that are quoted below
from some Business authority: “Rapid technology change and the
increasing global nature of competition are forcing South African
International Business Billy C Sichone 13
firms to distribute their products more widely and quickly, cope
with environmental change, and reduce costs…” Indeed, future
successful businesses will treat the entire world as their domain in
terms of meeting their supply and demand requirements.
In such a globalised market, the domestic company will need to be
sustainably competitive. Globalization is not a new concept, but
there are relatively new factors that have contributed to its recent
prominence, such as the opening of new markets for South African
businesses and new communication and transport technology,
resulting in a major expansion of International trade and
“The 1997,1998 and 1999 world competitiveness reports by the
World Economic Forum in Switzerland show a decline in South
Africa’s competitive position (relative to other newly
industrialized nations), especially in the area of
internationalization. Internationalization is measured in terms of
trade, exports, imports, cross border investment flows (e.g.
FDI),international alliances and partnerships with foreign firms,
protectionism and export/import diversification. South Africa’s
level of internationalization has declined since 1992, while in
terms of partnerships with foreign firms, the country occupies the
penultimate competitive position among newly industrialized
nations. Although South Africa’s relative position has declined, the
country is still rated among the top five emerging markets in the
World…with Hong Kong, Malaysia, India, South Korea”
people have made assertions in different forums that Africa stands
to universally lose despite being the major global primary raw
material source. Among the giants of our day is Dr Kaunda of
Zambia who has asserted repeatedly that Africa has been left on
the fringes as globalisation takes root on the planet. The venerable
Kenneth Kaunda asserts that Africa stands in peculiarly vulnerable
Global Business pp 4& 5. Source of comparative data: Morgan Stanley, Business report January 15,1999.
We may add China in 2008.
International Business Billy C Sichone 14
dire straits, as it does not have the capacity to handle the dynamic
technologically accelerated business whirl winds. Others have
flatly and consistently rejected these claims and advanced contra
opinions. In the book, we set out to contrast these conflicting
assertions and in the process offering a position based on our
findings. Thus, the questions that beg answering are:
1. Is Africa really left on the margins by globalisation?
2. If so, why? Varying views advanced.
4. To what extent?
5. The effect of Globalisation on Africa
6. What options are left for Africa?
7. What does the future of Africa look like in tomorrow’s global
village, Africa’s role and position.
For our study to be meaningful, we shall first give the background,
and then narrow our discussion on the questions raised above.
International Business Billy C Sichone 15
CHAPTFR 2 CHAPTFR 2 CHAPTFR 2 CHAPTFR 2
International business in perspective
International business is taking different shades and is in many senses
. This dynamic world is rapidly mutating to the extent
that it has been reduced to a “Global village”. This assertion is true in every
sense because what happens in one part of the world has a rippling effect on
some business transaction thousands of kilometres away. Many a nation that
was firmly gripped in one ideological clutches and wedded to poverty are
now bursting out of the repressive cocoons and making strides to claim a
place among the world’s great economic trading giants. For Instance,
Zambia has been under going rapid transformation from a command
economy to a vibrant market economy
. No longer will people have to
queue up to buy essential commodities but will simply walk into a shop and
purchase whatever they wish at will. Unfortunately, the infant local
industries have suffocated in the process as a result of the unprecedented
fierce competition exacerbated by inescapable FDI. In real terms, Zambia is
a mere trading country (1992-2002 and beyond) that exists as a consumer
market rather than a producer. At best, it can be viewed as an extended
province of the Herculean South African economy. Be that as it may, it is in
a way unavoidable as trade is no longer localized but goes far and wide. It
defies trade barriers or country boundaries. Ten years down the line after the
privatisation act of 1992, the majority of Zambians do not know what is
going on and are still looking back to “Egypt” like the Children of Israel did
after departing from bondage when things got tough. (Exodus 16:2-3, Holy
Bible). In a sense, the cross roads are confusing to the unschooled mind.
As such, it is critical to have well informed as well as correctly position the
right people in the right places at the right time to lead the multinational
companies. We are now experiencing the first generation of global managers
Refer to The Post news paper of Tuesday 10
December, 2002 pp 2. Article entitled “Globalization is
here and there is nothing we can do to stop it-Mfula” check also the Editorial comment for the same day.
Refer to Zambia-A review of commerce, industry & tourism millennium edition “foreword” pp3 2000
International Business Billy C Sichone 16
whose mettle is tested on international assignments, where they manage
organizations with a diverse work force and perceive things in different
ways due to the script inscribed on their souls. It is to this end that this book
was written, so that the international manager’s role in the rapidly mutating
business environment can be fully appreciated and understood. In other
words, this volume is a synthesis of many of the extant books on the
academic business market today.
Thus, we seek to outline the changing function of the International business
Manager and also hope to answer one question whether Africa has really
been marginalized by globalisation. The latter part is dealt with in the second
part of this book. The work is monumental in that it covers all aspects of the
International Manager albeit in a veiled form sometimes. To do this, the
work is divided into several parts, each focusing on various aspects such as
the over view of international business, the cultural environmental aspects,
the techniques to assess the market opportunities, ways to develop strategies,
the corporate context of Marketing in financial terms, the effect of
globalisation on Africa’s marginalisation and finally the supplement which
among many things contains a mini bank of case studies wrapping up the
various sections listed above.
$cope oI study
The study at hand is one that demands clear thinking and a high analytical
prowess on the part of the researcher. As such, it is equally very critical to
mark well the parameters of the study as well as the limitations that might
affect the results.
With respect to scope and in view of the vastness of the subject, we shall
first give general definitions and then zero in on the international business
scenario as it affects the Nations. In other words, this is a comparative study
of what obtained yesterday and what is will be the case in the not too distant
future. The ideal would have been to concentrate on a locality and do a
detailed scan but the nature of the subject at hand forbids that to some
extent. That not withstanding, we have did a general over view, drew
principles that we applied. Put differently, we limited ourselves to the
changing nature of business and role of an international individual. This
approach thus highlighted the important features and considerations to be
taken before hand.
International Business Billy C Sichone 17
To that end then, we visited many websites, books and consulted some
leading business leaders. By that token the major limitations revolved
around the lack of visiting many sites mentioned in the study as well as the
inability to carry out some kind of verification or scientific sampling
method. The impact on the study is that the bulk of the conclusions result
from a wide scope of reading, which might lead to subjectivity on the part of
the researcher, the Self Reference Criterion (SRC), may rear its head once in
a while. In a nutshell, this study is limited to a literature review.
As earlier intimated, the bulk of the data portrayed in this work is basically
on the readings gathered over time either through the internet, TV, hard
copies or even through various discussion forums informally and other wise.
Thus, as the research went on, documentation took place as the
bibliography/references will ably attest. Where possible, actual verification
took place to ascertain the assertions.
Inpoztance oI study
From the above painted scenario (Situational analysis) it is therefore
extremely critical to embark on the study of international business. But why
bother our selves in the study of International business; after all, the vast
majority of people spend their lives hardly going beyond the borders of their
countries. In attempting to answer that question, it is necessary to state that
such gross ignorance catches many a soul unaware making them wonder at
what has hit them when business calamity strikes. The problem at hand is
that International business affects all of us regardless of where we live in
one-way or the other. The other secondary reason is that ignorance hinders
diligence, enterprise and proactivity. In point form, the critical importance of
this study is given below:
1. The rapid globalization of world business.
2. The emergence of economic blocks e.g. NAFTA, EU SADC etc
3. The proliferation of “United States” e.g. European Union, USA,
African Union etc
4. The Changing face of international politics, law, trade etc
5. The impact of Information Technology on trade
6. The rise of the international employee and employer
International Business Billy C Sichone 18
7. The rise and fall of the huge multinational companies in relation to the
8. The transition to the brand name rather than to assets, factories or
9. The impact of Environmentalism on international business.
10. The accelerated rate of business and its impact on world, nations and
11. The rise and fall of economic giants today and tomorrow.
12. Further, international business conditions are having an increasingly
significant impact on organization in the following ways: a. They
affect the nature of the industry, b. They affect the various positions of
different countries, the size and wealth of their markets and prosperity
and efficiency of their productive bases, c. They affect the
management, by governments or international institutional
distributions, of the frame work in which business is done and the
nature of international relations.
13. Available investment opportunities-Investment has been loosely
defined as “the sacrifice of something now for the prospect of
something later. This means that either individually, as a company or
as a country, we forgo the consumption of goods today in order to
achieve greater consumption in future. The essence of investment is
time and also risk"
14. The impact of world problems on business such as terrorism and its
repercussions (Remember the September 11 2001 attack on the New
York World trade tower buildings? How has it affected trade and
investment?), natural disasters and war.
15. The recent winds of change politically and otherwise e.g. the demise
of apartheid, the collapse of Communism, the proliferation of
democracy and the rapid transition from Command to Market
economies, the world population exponential explosion, the
outsourcing trend as well as the coming to age of once insignificant
trade players like China in to world trade markets etc. All these have
to be studied and meticulously grasped in order to eke a clear path to
Success in Investment 3
Edition pp1 1987 by R.G Winfield & S.J.Curry
Personally, I am beginning to rank the USA as a kind of terrorist that bashes and bullies other countries
around in the name of fighting terrorism. A case in point is the recent harassment of Iraq totally over
looking the UN inspection team report. The UN is toothless against the States, for they cannot control this
eccentric giant run out of its cage. In principle, the USA concerns are fine and justifiable, which I would
support but to over look protocal and laid down procedure amounts to terrorism. That not with standing, the
new terrorism must be checked and regulated lest it induces the third World war.
International Business Billy C Sichone 19
16. The impact of HIV/AIDS on International business, trade and
. At one time, Aids was ignored as a small controllable
problem but in the past decade or so, the ravaging effects are
beginning to bite. Many a development agent is beginning to pay
more particular attention to this scourge as it threatens to wipe out all
developmental strides hither to achieved. This issue has been noted by
some of the leading transformational developmental agencies in the
World, the World Vision International. Most of the strategies are now
designed with the pandemic in view.
17. The effect of Africa’s marginalisation in a global economy.
Going by the above points, it is very clear that the study of the subject at
hand goes without saying, it is cardinal. With a good appreciation of the
above highlighted facts, it would avert many a business shipwreck that
attends many an initially grand and successful enterprise. The objective then
of this study is to expose people to factors that affect international business
if they are to venture out there successfully, for many a ship runs aground
among the rocks for want of light about the high seas of international
Check Dr Kaunda’s assertions in the Post newspaper dated 28
July 2002 pp 1 “HIV is becoming a threat
to Security-KK” issue # 2111SU34.Read the Editorial comment as well.
International Business Billy C Sichone 20
CHAPTFR CHAPTFR CHAPTFR CHAPTFR 3 33 3
InteznatIonaI BusIness-Its natuze and deIInItIon
In progressing to study international business it is fitting for us to define
terms so that we have a common understanding. What is International
Business? How does it impact on our every day lives? What is the history
and future of International business?
Admittedly, the precise definition for IB is elusive and difficult to elaborate
in capsule form but one person has defined it as “The carrying out of
business transactions in either service, import or export trade terms from one
country to another”
. Dr Bennett has the following to say: “International
business involves commercial activities that cross national frontiers. It
concerns the international movement of goods, capital, services, employees
and technology; importing and exporting; cross-border transactions in
intellectual property (patents, trade marks, know-how, copyright materials,
etc) via licensing and franchising; investments in physical and financial
assets in foreign countries…”
This elaborate definition is comprehensive
but not quite precise. The question there fore still lingers, What exactly is
International business? Cateora has given a more precise definition as “the
performance of business activities that direct the flow of a country’s goods
and services to consumers or users in more than one nation for a profit.”
The profit motive is paramount. Cleary, from this definition, we can see that
IB transcends traditional political boundaries and affects all people
everywhere regardless of their location. To amplify the definition further, IB
is that combination of business transactions across countries regardless of
their geographical locations or political boundaries. The major catalysts to
this kind of trade development are technology, money, knowledge, time and
demand. The nature of International business is a complex web constituted
of various different disciplines. For instance, International relations,
Marketing, Finance, Information Technology, Management, quality and
myriad other areas are all intertwined and locked up in the phrase
“International Business” and as such makes it difficult to come up with one
Definition supplied by the author
Roger Bennett PhD, International Business 2
edition 2000 pp1
Philip Cateora International marketing 9
edition pp 6-This is the definition for “International Marketing”
International Business Billy C Sichone 21
simple definition without doing injustice to the other elements of the
compound word “International Business”. A fourth definition from Daniel
J.D & Radebaugh L.H attempts to put it more succinctly as follows:
business involves all those commercial activities between two or
more countries. These commercial activities may be under taken by private
companies with a view to profit-making, or Government organizations in
which case there is a generally no profit motive”
further still, Czinkota R
says “ Global commercial activities are defined as the movement of
resources, goods, services and skills over international borders. The
resources involved are raw materials, capital, people, and technology, while
goods refer to half finished and finished products. Services include
accounting, advertising, communications, computer services, advisory
services, education and training, legal opinions and banking activities, while
skills cover management and technical skills”
A short history of
International business is handy at this stage. Business transactions have been
going on for many generations dating back to pre historic times albeit in a
different format. Before money was established as the universal medium of
exchange, people used to trade locally and abroad, though modern political
boundaries not there. Never the less, akin to Hyenas, people knew by instinct
the stretches of their boundaries. In Southern province of Zambia, a place
called the “Ngombe illede” has been excavated and evidence exists that
foreign trade took place there. Among the merchandise that was traded was
salt, guns and probably slaves. Another Baobab tree in Southern Province
still where slave trade flourished can be found in Livingstone. In Biblical
times, Athens, Greece was a centre of international trade and learning (Acts
17). Jerusalem must have been another trading centre in ancient times (Acts
2:5). For now, we progress highlight the various types of businesses and
the players there in. All these were focal points for trading in the various
localities. Modern international trade follows the same principles though on
a higher and more complex level.
Types oI InteznatIonaI busIness
1. Merchandise exports and imports
2. Service exports and imports
3. Tourism and Transportation
4. Use of assets;
Note that “Global” is different from “International” business
J.D & Radebaugh .L.H 1998 International business: environments and Operations 8
Czinkota R C Ronkainen as quaoted in Global business pp5
International Business Billy C Sichone 22
5. Investments, including direct and portfolio investments,
licensing, concessions and turn key investments, cooperative
6. Multi national enterprise
Trends in later nationalization of business: some mega trends
influencing International Business include:
1. Technological renewal (Reinforcing the importance.)
2. The rediscovery of capitalism.
3. The development of the services industry.
4. The development of regional trading blocs
5. Increasing ties between different economics;
6. The fact that the U.S.A is currently the #1 economic force in
7. Increasing competition among the international industries.
8. The unstable international political climate;
9. Changing demographic patterns and the impact of AIDS;
12. Changing value systems
Majoz pIayezs In InteznatIonaI busIness
The international business industry has many players but for now, we
synthesize two major classes:
1. PzoIIt nakIng
This is where the entity exists primarily to make profit and will do
anything to remain competitive as long as possible profitably regardless
of what happens to the competitors. This is where the vast majority of
businesses fall especially the large Multinational Corporation
operate in the international business environment. Usually, the direct
investment strategy has been used hither to by the MNC rather than
exporting from the country of origin.
Daniel Papp states that Globally, there are at least 7,500 privately owned corporations operating at least
27,000 subsidiaries in other countries pp 80 2
edition “contemporary international relations”
International Business Billy C Sichone 23
The profit making entities (Direct investors or mere exporters/ importers)
are by far the most influential players in the International environment in
that they have been around for a longer time than the non-profit making
organizations. Even in Biblical times, the profit motive was emphasized
except that certain ethics were observed. A case in point is the story of
the shrewd manager in Luke 16 & 19. For any business to survive today,
they have to be ready to change and watch the environment meticulously.
The business entity seeks to cut a niche that is far above all other
competitors. For a number of years in the 20
Century, the command
economies apparently succeeded by creating the huge monopolies that
tended to distort the world economy. For instance, in Zambia at one time,
one could not get essential commodities easily even though they had cash
because the prices and production were centrally controlled and
determined by the state. This went on for over two decades until 1991
when the country switched to a free market economy. Although the
sudden transition was drastic, painful and hasty, the potential benefits are
great. As these words are typed, one can go into almost any shop and get
goods that were once a pipe dream years ago. The issues at play are that
the government has with drawn from active control of business but plays
the role of facilitator by creating a conducive environment. Thus, we
have witnessed an upsurge of many entrepreneurs in the last decade
(from 1991) and this is likely to increase. By that token, we have also
seen an upswing of many businesses from all angles of the globe placing
their bait on the Zambian market. Most of these, as earlier intimated are
profit driven and will do any and every thing to get as much profit as
possible, some times at the expense of the native. In this selfsame setting,
what ultimately sells is the good that is timely, convenient, the right
price, place and high quality. By that token, the international business
entity must satisfy customers in the far-flung areas of the world. A
homogeneous taste of goods is envisioned as the market becomes global,
with the aid of the already powerful marketing machinery.
Although most of the traditional monopolies are paralysed in the business
bone yard, some modern monopolies have arisen. A case in point is the
Microsoft company run by the famous Bill Gates. Almost all the
operating systems in the world today are based on this company’s genius.
Other competitors are in danger of extinction unless they come up with a
magic formula to dislodge Gates.
International business, with its sharp profit motive how ever brings
problems for the poorer nation as their market is limited or manipulated
International Business Billy C Sichone 24
by the richer nations
. For instance, the Genetically Modified Organism
(GMO) saga that has buffeted Zambia lately (2002) has to do with
international trade at the back of the curtains (behind the scenes).
Principally, to accept GMO is potentially to close the naturally grown
species market of the European Union. Thus, to preserve the little that
remains, the country decided to reject GMO maize, at least for a season
so as to still command some European market. Unfortunately for Zambia,
all its neighbours have accepted the self same GMO effectively making
Zambia look the odd one out. With the human eye, the refusal looks
barbaric but in the long run may be a strength for generations yet to step
this way. There are other areas at hand such as the tax rebates, the foreign
exchange controls and the employment of expatriates as well as the
externalization of cash.
But what are the characteristics of the normal profit making
organization? The following come to mind:
1. They are more focused on the profit and loss account as well as the
balance sheet. Unlike the non-profit making organizations, these
organizations are only interested in a person as long as they add value
to the organization and able to perform, the absence of which spells
doom for the same. Should there be any indication of losses, then the
witch hunting begins and not a few heads roll. The organization
hardly bothers about staff welfare, community benefit or the
conditions in which people work. What counts is raking in millions of
2. The financial portfolios/offices are usually very important
comparatively. In this we mean that because the profit making
organizations are keener to reap as much cash as possible, the people
that take care of the self same cash take a prominent place in decision
making at the expense of other equally critical staff. Where the
Accountant is the final decision maker, just know that the
organization places high value on cash. Although this is the case,
many non-profit making organizations are beginning to veer towards
this extreme, as the budget is a key component of the proposal
3. The workers employed are only those that are critical and add value to
the organization. Closely connected to # 1 above, the people
Refer to Dr Kenneth Kaunda’s aasertion in the Post news paper dated 29
September 2002 pp1 & 4
International Business Billy C Sichone 25
employed are either the needful professionals or cheap labour,
depending on what is at stake. Should one be found wanting or
redundant, they are pruned off without much ado. This is the ugly face
of the profit making organization.
4. The company is only perceived to be meeting its objectives when it
continues to make roaring profits regardless of the social obligations,
although this assertion is debatable today. Again this is related to # 1
above but the thrust here is the aspect of the heartlessness of the
traditional profit making organization. The progressive ones are
slowly becoming holistic in approach and will go beyond the pay
cheque to look after their employees much better. This modern
approach is viewed as critical because a well-supported staff with the
right environment will perform wonders the next time they step into
the office. Basically, a troubled mind will hardly maximise the latent
5. The profit making organization changes more radically and frequently
than the non-profit making organization although this may not be
entirely true in the near future. Since the profit making organization is
all about cash, it must needs be in touch with the changing world so as
to keep in step with the times. As such, re engineering and mutations
are the order of the day without due regard to the players or the
employees. If it means laying off any number of workers so as to
remain competitive and profitable, the organization will do just that
6. The profit making organization will use any lawful means no matter
what it costs to get a competitive edge over others. This goes without
saying, as “survival of the fittest” is the game rule, much like atheistic
Darwin used to proclaim.
7. The profit making organization usually is top down in management
approach although this is slowly changing as more companies adopt
the modern progressive styles. This is the usual trend in ancient
organization where the top brass is viewed as the infallibles in all
decision-making issues. This approach, as has been portrayed in
modern management studies is hardly helpful but sadly true. The view
of this type of structure is that the strategic planners know better what
is at stake and thus are better positioned to show the direction of the
8. In the profit making organization, the customer is king, quality is
paramount and time is another dimension to success. Today, unlike in
the past, the customer is the one that calls the shots. All products
International Business Billy C Sichone 26
worth their salt will be customer taste driven and will be of the highest
quality standards. In the past, the customer had no say and bought
what was available but today, prior market research is critical in
ascertaining what the customer wants and needs not what the
company perceives the customer might or will need.
9. Company image is guarded jealously because this has an effect on
future sales. Closely connected to # 8 above, the quest to maintain a
high profile and image, organizations will do every thing to satisfy the
customer, knowing that these same people are the ones who will
market the products to other people. Hence, the “bending backwards”
syndrome to please the king (customer)
10. Brand name is key to many businesses and when a company sale is
taking place, this intangible asset value is factored into the price as the
good will. This explains why some names are protected from all
angles from Pirates. A classic example is the Microsoft XP program
that can only be installed once. This is a bid to clamp down on
plagiarism and piracy that damages the product/brand image.
From the above mentioned points, we can safely assert that the only way to
succeed is to have the right acumen, information, financial muscle and team
to achieve maximum success in a given time frame and locality
2. Non-pzoIIt nakIng busIness
This is where the entity functions on the income and expenditure basis.
The non-profit making organization receives, spends and reports on the
cash received from a donor. Most of the NGOs, Societies, clubs and
research institutes fall in to this category. The NGO industry begun as a
small insignificant player in world business and was largely ignored but
as the decades have gone by, the position has radically altered. The once
little stream is now a flood of activity. In his book “contemporary
, Daniel Papp traces the development of the NGO
world into a formidable force in world business. Papp devotes an entire
chapter and shows that the world cannot avoid this new trend. Among the
reasons that have made NGOs flourish is the confidence, principles and
the relative lack of bureaucracy and red tape that characterizes the
world’s governments although non profit making themselves. The
Refer to Chapter 5 of the book where he highlights the International Governmental organizations (IGO)
and other significant players. He further states that at the publishing time of edition, that the NGO influence
has risen drastically since the second world war.
International Business Billy C Sichone 27
following points give in capsule form, the fertile ground for NGO
1. The NGOs are usually freer from Bureaucracy than other government
or quasi government institutions. In the early stages of organizational
development, the NGOs, like any other organism, tend to be very
fluid, agile, lean and proactive in many senses compared to the
slothful gigantic structures common to us. An issue that would
ordinarily take a year to decide upon the traditional setting would
hardly take a day or week to be responded to and action taken. Thus,
many donors would naturally opt to work with such progressive,
accountable and responsive organizations. Another feature tied to
fluidity is accountability that is further elaborated upon in point (4)
2. The NGOs are usually agile and ready to change. Apart from fluidity,
the said NGOs are always interacting with the environment and by
that token mutate more frequently and easily. The lead NGOs of today
are ever learning and continuously improving on the quality delivery
systems that may not be so for the complex government. To capture
attention in this fast changing world, one must be ahead of rivals, in
this case the rival are the governments and other bureaucratic entities.
3. The NGOs move by principle and by that token are usually non-
partisan in approach. This is one of the greatest hallmarks of NGOs
that has put them on the horizon. Most of the other entities are either
partisan or not objective in their approach to issues whereas the NGOs
maintain a clear stand and seek to toll that line to the very end. For
instance, when a political party ascends to power, it rarely maintains
the objectivity it claims to have during the run up to the elections.
This stance is hardly surprising especially in the African setting but as
for the NGOs, most of them are not tied to governments or other
related agencies that hijack objectivity.
4. The NGOs are usually very strict with accountability and will ensure a
task is done timorously and according to plan. This is another plus
that accrues to NGOs as they are usually very strict and will always
account for cash to the last coin, unlike many a government that will
seize every opportunity to divert funds either in cash form or by
having endless workshops and planning meetings. In the end, the
intended beneficiaries hardly see any thing of the so much publicized
grants or loans. The picture is different for the NGO world that
justifies every expense.
International Business Billy C Sichone 28
5. The NGOs are the vehicle for modern human rights advocacy for the
voiceless in the world. In this, most NGOs ensure that they seek to
bring about equity in all areas and go beyond lip service in what they
pledge themselves to.
6. Unlike many a poor government, many NGOs never divert funds but
stick to budget and goals. This is closely connected to# 4 above
except that the thrust lies on the strictness to budget and goals. The
activities to be done are usually specific and well planned to the finer
details thereby leaving no room for diversion of funds. The said
NGOs go by benchmarks and plan of action. Constant review is the
order of the day. This may not necessarily hold true in other entities.
7. NGOs usually relocate from place to place depending on the need in a
particular area and thus cannot be tied to a place forever unless they
are relevant. The traditional institutions are usually static, and
permanently stationed in one place but the NGOs usually run by
projects that have a definite life span after which they either relocate
or renew the mandate so as to record the intended impact. This
“pilgrim” status makes NGOs go focused and less expensive to run in
the long term. This assertion is strengthened by the way in which
people can be safely laid off without much ado, in terms of paying
them their terminal dues. The contract arrangement ties in well with
NGOs though this may be a booby trap to settle old scores. In any
case, many donors pledge funds yearly.
8. Tied to (7) above, most of the huge NGOs are international in out look
and presence thus have the ability to handle the global dynamics and
easily adapt. By that token, the NGOs are in one sense local but also
international in influence.
9. Usually, many NGOs although neither partisan nor antagonistic, will
usually work with the Government of the day. Their role is usually
complementary, depending on its mandate. For instance, the World
Vision International adopts the local country nomenclature such as
“World Vision Zambia” so that the indigenous face might be
maintained and yet in the same breath is a partnership of Christians in
over 95 countries. Same goes for CARE international.
10. Usually, most NGOs are implementing agencies and as such source
funds from various donors. Some of the donors are individuals,
Governments, religious organizations or indeed other institutions. The
task for many an NGO is to ensure the maximum benefit reaches the
11. Agents of change e.g. transformational development…
International Business Billy C Sichone 29
There could be other latent strengths that NGOs have over the traditional
Governments but they too have clay feet such as:
1. When they become too big, they tend to be bureaucratic and less
2. They become too many for the available cash market and thus are too
fragmented and their net impact is almost zero. It is harder now to get
a dollar from a donor than it was 50 years ago due to the proliferation
of NGO chasing the same static market.
3. Unfortunately, we have noted an upsurge of phoney NGOs that have
appeared on the horizon akin to a meteorite and have either fizzled out
or vanished with donor cash. This has created doubt and reluctance
from the would be cash givers.
4. The nature of world business is that approaches and preferences are
constantly changing and many an NGO have remained stuck to
ancient strategies that won battles in yester years but are now
obsolete. They are too slow to move with the times
5. In some cases, the donor requirements and demands may be contrary
to the NGO objectives and thus hinder any collaboration. For instance,
the World Vision International is Christian in essence and as such
some donor demands are not compatible with the ethics. This leads to
not a few dollars lost. Apostatic and atheistic donors cannot freely
give their hard earned cash without injuring their consciences.
6. The International perspective of these self same organizations some
times raises problems for some quarters within the same fold. For
instance, if the organizational ethics forbid bribery but if in one
country, one cannot get help unless a tip is given, this has brought
about misunderstanding. The SRC often takes the centre stage and a
judgmental spirit crops up.
Thus, we have briefly glanced at another type of international business
player, we now proceed to briefly outline the conditions favouring
International business before we later venture to consider some problems
encountered in the study of the subject at hand. Let us keep the objective
eye sharp in focus as we hurtle along.
CondItIons IavouzIng the thzIvIng oI InteznatIonaI
International Business Billy C Sichone 30
1. Stable Economy i.e. inflation manageable
2. Stable political climate
3. Free & open market i.e. major players are private enterprises, Market
forces are determine the prices (by supply and demand)
4. Good communication network and data base
5. Favourable legal environment encouraging free trade
6. Incentives such as tax rebates
Having shown the conditions needed for a sustained thriving
international business environment, we now proceed to briefly lay down
the stages leading to the ideal business environment.
$tages to InteznatIonaI tzade
International trade does not pop up suddenly from nowhere but has stages
that it goes through as it evolves. As intimated later, these are not hard
and fast rules but for the purposes of our study, the stages are used.
Arthur Lewis, lists a number of stages that we out line below:
1. Exports- “A country cannot begin development from a subsistence
level by producing for the home market only. An increase in per capita
income increases demand for nearly everything, but no country can
produce nearly everything…self-sustaining progress can continue only if
the increase in imports is matched by an increase in exports…thus, if an
increase in out put increases imports, there is a deficit of home spending.
This releases goods that are automatically exported…”
2. Import substitution-The second stage of economic development is
import substitution, producing for the home market. According to Lewis,
a country cannot start its development by producing for the home market,
but given export production, can generate further progress by substituting
home production for imports….import substitution is not confined to
manufactured goods and industrial equipment but includes the
stimulation of raw materials production also.
3. Structural inflation- “Apart from technical factors, which determine
which manufactures to make at home and which to import, the market for
manufactures as a whole (domestic and imported) is limited by the
For example, Zambia has managed to arrest the uncontrollable inflationary trends to around 18% in 2002,
though it should have reduced to 13% but due to the drought and other natural disasters, this has retarded
A Lewis, Development Planning 1979 pp38,39
International Business Billy C Sichone 31
standard of living…the essence of structural inflation is that a more rapid
growth of the economy is prevented by the low growth rate of exports
and a too high propensity for import”
3. Breaking bottle necks that prevent domestic supplies from increasing
in response to domestic demands, or else to increase the rate of
growth of exports to what ever level would be consistent with the
growth of out put and the propensity to import taken over. When the
fourth stage is completed, elasticities of supply will be fairly high, but
the country will still not be able to produce everything it consumes…
Some of the bottle necks will be dealt with by implanting a farm policy,
export promotion and balanced growth in all sectors.
InteznatIonaI tzade InbaIances-the causes
ϒ ϒϒ ϒ
If international development is ever going to take place effectively, a
number of issues must be addressed so that the right remedy is prescribed.
For instance, it is very clear that there is a wide trade imbalance between
nations and this definitely affects the levels of trade development. It would
interest you to know that Africa’s trade size is just about 1% of the total
world trade. To diagnose the root problem, we must first trace the stages of
development and then ascertain the magnitude of the variance and the map
out a way forward. Cateora, in his monumental work has this to say:
The nations go through “5 economic stages and each stage is a function of
the cost of labour, technological capability of buyers, scale of operation,
interest rates and the level of production sophistication.
Growth is the movement from one stage to another and countries in the first
three stages are considered economically under developed…
1. Traditional society- this is composed of the least development where
the literacy levels are very low.
2. The preconditions for take off- this is the process of transition to take
off stage…advances of modern science are beginning to be applied in
Lewis pp 44-54
Some people like Dr KD Kaunda of Zambia strongly feel the policies employed by world bodies like the
IMF are retrogressive rather than constructive. For instance, in the Post News paper of 17
Nov 2002 pp1
& 4, Kaunda asserts that IMF policies have reduced African countries to their weakest levels. In response,
Dr Mark Ellyne representing the IMF rejects that view in the Post News paper of 20
November 2002 on
International Business Billy C Sichone 32
trade & production. Development of transportation, communication,
power, education, health and other public under takings are begun I a
small but important way.
3. The take off. Countries achieve a growth pattern that becomes a
4. The drive to maturity- after take off, sustained progress is maintained
and economy seeks to extend modern technology to all fronts of
economic activity. The economy takes on international involvement
in this stage. The economy demonstrates that it has the technical &
entrepreneurial skills to produce not every thing, but choose to
5. The age of high mass production-leads to the leading economic
sectors toward durable consumers’ goods and services. Real income
per capita rises to the point where very large number of people have
significant amounts of discretionary income.”
Though well thought out and neatly laid out, the above stages are criticized
as being impossible to categorically follow in the real world because
countries have a mixture of issues at one and the same time. For instance,
Zambia is a country that hardly has all the stage two features but has begun
transacting on the international trade level. This is due to the liberalized
economy and the advent of globalisation. As such, it is difficult to “box” a
country into the neat break down.
The next indicator to use in determining the trade imbalance levels is the
Gross domestic product and Gross National product (GDP & GNP)
although mentioned later on in the paper.
1. ODP & ONP
ƒ ƒƒ ƒ
Defined as two measures of a country’s economic activity. GDP is a
measure of the market value of all goods and services produced within
the boundaries of a nation, regardless of asset ownership. Unlike GNP,
GDP excludes receipts from that nation’s business operations in foreign
Cateora P International Marketing 9
edition pp226. Stages first proposed by Walt W Rostow, the five
stages of eceonomic growth 2
edition (London: Cambridge University press 1971) p10
It may interest you that Zambia’s GDP rate has fluctuated over the years for instance the following
statistics were recorded for the period 1987 to 1991 respectively:
(%) 2.7,6.3,0.1,-0.5 & -1.8. Source: Profit magazine, April 1993 # 1/11 pp48
International Business Billy C Sichone 33
countries, as well as the share of reinvested earnings in foreign facilities
of domestic corporations. In other words, economic growth is generally
understood to mean an increase in national production that results in a
increase in average per capita GDP. When these indicators are compared
from country to country, it becomes apparent which nation is doing better
and thus a better investment destination. As an example, consider the
table below showing the differences among four countries, USA, Zambia,
Japan and the UK. The differences are so wide to the extent that
Zambia’s economy would take over 200 years to grow to the levels of the
Table as at 1996
NA NA NA NA
USA 255 23,680 142,956 215,000 144,056 45,416
UK 57.9 18,403 22,744 20,000 26,084 3,685
JAPAN 124.3 29,516 37,076 100,000 57,657 22,839
Source:Table largely from Cateora’s international Marketing pp 265
exhibit 9-12 except the statistic on Zambia.
NA= Not available at research time.
Cross border monitor August 31,1994, international trade statistics year book (New York United
The above data shows that Japan is fast catching up relative to the
previous giants such as the UK.
Apart from the economic indicators as listed above, the availability of
liquid cash in the hands of genuine investors will help enhance
development. These selfsame investors will ordinarily build capacity and
the industrial fabric of the economy leading to more generation of cash.
As we know, excess cash in the economy will lead to inflation, yea, and
hyperinflation unless meticulously handled. Another pit fall to be avoided
is to allow limitless restrictions to remittance of the hard earned forex to
other countries. Although this assertion may sound plausible, it is not
Source: African Connexion international 1994 pp15
International Business Billy C Sichone 34
exactly in keeping with the ethics of international borderless trade. Cash
is the lubricant of economic development and must be present in the right
proportions in a nation. Thus, a cash budget is ideal unless the economy
has grown to high stable levels to reasonably cushion the effects of credit
transactions. The liquidity ratio is critical.
3. LeveI oI technoIogIcaI
ϒ ϒϒ ϒ
In the modern world, one ignores Technology at their own peril as tool
helps to accelerate economic development. Technology should be viewed
in its widest and general sense, from Electronics to heavy-duty industrial
machinery. For instance, in this information age, wider area networks
(WAN) and databases are essential to timely responsive strategic action.
4. Mazket natuzIty stage
Going by the GDP/GNP as well as the stages high lighted earlier on,
those nations at similar stages of development will experience better and
more fair trade as they will be able to bargain. But if two countries at
widely different levels of development trade, there is likely to be some
trade imbalance and usually in favour of the economic giant.
5. LeveI oI stock exchange tzansactIons
When the world trade nerve centre was destroyed on September 11 2001, the
world held its breathe because the New York stock exchange is by far the
most lucrative and advanced in the World and to halt business for a while is
extremely costly. The basic function of the stock exchange is to float, and
trade in shares of different entities listed on the stock exchange. As such,
only those companies with high profiles will generally list their company
shares relative to the development stage of the exchange market. In Zambia
for example, the stock exchange market (Lusaka stock exchange LUSE) is
hardly a decade old, having begun in 1994
. Although stock exchange is
gambling in principle, it never the less help to improve the economy in that
This aspect has turbid the developed economies into even higher orbs leaving the less developed nations
wallowing in poverty. It is a good thing for the developed world but can be a nightmare for the poor
nations. Dr Kaunda has asserted thus,”Globalisation has left Africa on the margins”-The post News paper,
September, 2002 pp 1 & 4 Issue # 2174SU43
Refer to Zamba-a review of commerce, industry & tourism millennium edition pp14 2000
International Business Billy C Sichone 35
company share/stocks either rise of fall depending on the performance of
each individual entity as well as the economic conditions.
Another critical aspect that must never be over looked in looking at the
factors is the intertwining effects of the economic climate at which the IB
activity finds itself. It should be noted that all economies, no matter how
potent, goes through the following cycle:
Upswing/recovery: This is when the economy begins to show some signs of
life towards recovery. Some of these are: Businesses building up their
inventories in reaction to rising sales, Investment in capital goods rises, and
employment created. Then the economy is beginning to be ripe for more IB
Boom: As the upswing gathers momentum, hurdles begin to appear in the
economy such as a shortage of skilled labour and raw materials due to the
rising demand. Thus, the companies are forced to improve their capacities to
reach optimum economies of scale. Optimism is at its height at this stage.
Downswing/recession: After enjoying the euphoria of a recovered economy,
and when people least expect, some thing just triggers another negative
motion-the recession! This is to be most dreaded and in a way, planners
ought to store up for the rainy day akin to what Joseph of Egypt centuries
ago (Genesis 41, Holy Bible). What happens when a recession sets in is
there is a sudden slow down in economic growth resulting in low sales and
demand, increased bankruptcies and liquidations, high inflation, rapid
currency power erosion and falling living standards.
Depression: This is the advanced and severe form of a recession where a
condition is created after the economic nose-diving. The Economy lies in
that depression for a while before it begins to show signs of life signalling an
upswing again. Some of the signs of the depression is lack of tangible
economic activity such as production, high un employment, reduced
spending, reduced profits and a weak currency.
Thus, depending at what stage one embarks on the IB activity, this will
affect the portability and viability of the business.
International Business Billy C Sichone 36
It is remarkable that despite the studies over the years, a recession is to some
in its magnitude and effects but one thing is sure,
there will be a slow down in economic growth and business. A classic
example is the one that took place in South East Asia a few years ago, after a
powerful unprecedented economic boom followed by a steep slump due to
the severe recession. The ripples of this went far a field not sparing even the
perceived developed and stable economies.
Thus we have shown that the trade imbalances and the conditions of the
economy are critical for a thriving international business environment to
evolve or else every attempt will be thwarted by the very factors thus
Although some signs can be identified. Refer to Andre Roux’s book “Everyone’s guide to the south
African Economy” pp27
International Business Billy C Sichone 37
CHAPTFR CHAPTFR CHAPTFR CHAPTFR 4 44 4
$tudyIng InteznatIonaI busIness-the chaIIenges
n over view of the current business scenario reveals that people from
different places look at one and the same issue and react differently. What
may seem right to one person may not necessarily be so to the next due to
our perceptions and values. As such, the International merchant must aware
before hand that interpretations of similar events will vary significantly from
place to place. This view of things is our Self-reference criterion (SRC)
In business, care must be taken not to react by SRC as various different
customs; tastes and cultures exist in the international business. The
following are some of the problems encountered:
1. Differing ethics
at varying locations but the same organization.
Circumstances, perceptions and reactions differ radically from place
2. The relativity of many issues. Closely connected to (1) above but
slightly different in that this point emphasises the difficulty one has to
come out dogmatically on issues at different points of the same
organization as people and systems interpret issues variously. It is
difficult to have one uniform standard.
3. The different cultures. The cultures play a major role in our accepting
or rejecting new issues. Thus, if one does not imbibe the local culture
well, it may hinder progress and in some cases block it all together.
Thus the cultures must be handled meticulously lest we offend or send
a wrong signal. For instance, the colour white means different things
from place to place. In the Far Eastern Asia, white means death while
in the west it means purity.
4. The different laws embraced and tolerated by the state. Some adopt
the Roman law, while others favour the English law while other still
favour the Islamic law. Incase of disputes, which law should be
summoned? This is connected to the political environment.
Ethics are “enquiry into the nature and grounds of morality where the term morality is taken to mean
moral judgements, standards and rules of conduct” Business ethics. Ferrel, Fraedrich, Ferrel pp 5
International Business Billy C Sichone 38
5. The different country policies and rules. Some countries follow their
own laws and rules that would be favourable to them and disregard
other players in the environment. These rules could either foster or
hinder international business. For instance, at the time of writing this
thesis, the Zimbabwean government is bickering with the British, the
former colonial master over the land reforms. As a result, Zimbabwe
has applied policies and rules that will favour it (Zimbabwe) so as to
hit back at Britain.
6. The attitude of the natives from different parts of the world. Some are
very progressive and open while others are too conservative. This
point largely explains why some parts of the world are more
developed than others, including certain provinces of the same
country. This last assertion is highly debatable though.
7. The religious inclinations especially where fundamentalism exists.
When we talk about the religious inclinations, one cannot divorce
these from the people themselves. For instance, in states that have
declared themselves Moslem, Christian or Hindu, there is a strong
emphasis placed on the interpretation of issues on the bedrock of
religion. Whilst certain advertisement may be acceptable to certain
religious sections, this is highly offensive to others. A point in case is
the “Satanic Verses” by Salmon Rushdie in 1989/90. This raised
untold uproar from the Moslem world while the Christian world
wondered where the problem actually lay! Another case in point is the
loss of a prominent World Vision International staff in Sudan
to suspected Moslem fundamentalist extremists. We could
further stretch this further to the Miss World contest due to be held in
Nigeria but abandoned and shifted to London after an advert
considered offensive to the Moslem community relating to the contest.
The advert suggested that the Prophet Mohammed if was alive today
would have lusted after the beauty pageants! This insinuation left over
100 dead in the blood bath that ensued
. In a nutshell, where
fundamentalism reigns supreme, certain places are no go areas for
certain sectors of society.
Without this hindsight, a business can run
aground sooner than it realizes.
8. The language barrier. This point goes without saying as language is an
effective barrier to all and sundry. There is a way in which an
September 2002,World Vision Zambia daily Vision
Miss World Beauty Contest move to London, 2002. Refer to the Sunday Post newspaper of 24
November 2002. pp 10
Refer to African connexion magazine volume 9 2
qtr 1994 pp5 to read on threatening fundamentalism.
International Business Billy C Sichone 39
excellent command of a native language, despite being a foreigner,
posses a hidden prowess to unlock many an iron curtain. Long before
venturing into a new area, it is advisable to get some basics about a
9. The different tastes of food clothing etc. This issue is relative from
place to place. For instance, the Americans might be crazy about
Kentucky fried Chickens
but when the same chickens are taken to
Japan, they will not sale. No only in the area of food but in dress as
well. The British worker will emphasise on formal dressing while the
American will appear for a board meeting in Jeans! This is an
example of tastes and attitudes.
10. The history of the places. Always, it is wise to enquire into the past of
a given locality as this plays a major part in the way people react. If
the place for instance is known to be highly superstitious, mystical
and many ritual murders, it would help to introduce products that will
not make people’s hair stand on end or ridicule the local traditions.
11. The topography and political boundaries. To some extent connected to
(10) above, the area might have been locked up for ages from outside
influence on account of the remoteness or landscape. Further, the
political boundaries also have a way in which they either shield from
outside influential winds or foster the same. Thus, it is critical to know
before hand the accessibility of the areas in question. For instance,
some parts of Canada are practically closed to certain activities during
winter while some areas in Brazil are practically impossible to access
due to the poor communication network.
12. The economic environment- In a way, this has to do with the above
mentioned issues but here we are talking about the Gross domestic
product, the economic growth
rate and other related economic status
key indicators. For instance, it is highly unwise to trade in a country
whose inflation rate is way out of this world as losses would be the
order of the day and the return un predictable. A case in point was the
Brazil situation recently fanned by inflation.
13. The international policies of the countries. Depending on the party in
power at a given point, parties tend to have different perspectives
towards their international policies. For Instance, the Democrats in
refer to case study attached in appendix C
Economic growth is the rate of growth measured by the Gross domestic product. For example, if the
economy produced 1,000 units of item X in 2002 and then produced 1,001 units of the same in 2003, then
the economy would have grown by 0.1%. See “Everyone’s guide to the South African Economy” by Andre
International Business Billy C Sichone 40
The USA have favourable domestic policies as they focus on the
home economy while the Republicans tend to focus on the foreign
policy aspect to make USA more and more powerful, almost at the
expense of the Citizens. This is not only unique to the States but
14. The degree of influence of environmentalism. In recent years,
Environmentalism is not a simple push over as it used to be because
NGOs like Green peace will give no peace to any Government that
either neglects or destroys the environment. In some countries, if the
Environmental policy is suspect, not a few votes are lost. As such, one
has to tread carefully in what they seek to trade as well as their social
policy. In times to come, businesses may be required to state exactly
their position on certain issues and based on that, they will either be
given a green light or ejected forthwith.
15. The scarcity and accessibilities of resources such as a good transport
network, e-mail facilities etc. This is connected to (11) and (12) above
but emphasizes the various networks in a certain area. If the basic
facilities are there, then it may be possible to operate effectively but if
not, reconsider carefully by applying opportunity cost principles.
16. The stability of the countries- this has to do with the political activity
alluded to in (4) above except that this point is the outworking of the
various players in a given environment. Politics has a way of either
stabilizing or wrecking an economy. In politically turbulent areas, it is
clearly unwise to trade there. This has been the case in Angola, Congo
DR, Rwanda and for many years in the past, in South Africa and
Zimbabwe. A number of these are peace havens though the crime
wave in countries like South Africa makes one think thrice before
venturing over with “hot cake contrabands”.
17. The climate- this affects many areas of the economy as highlighted in
(11) above. Some climates expressly forbid certain activities taking
place while others invite those selfsame issues. Prior to going out,
enquire on the suitability of the climate to your line of trade.
18. The legal and social environment. The legal environment strictly has
to do with the laws adopted as the basis for regulating and settling
international legal disputes. This aspect, although earlier on alluded to
is extremely important to consider separately because upon this rock
rests progress or failure of a particular venture. Some legal frame
works are very hostile to international trade while others offer
tremendous potential opportunities provided one pulls the strings and
International Business Billy C Sichone 41
19. Differing ethics and values. This is connected to # 1 & 2 above though
this focuses on the whole area of morality defining what is wrong and
right in the international business scenario (for our purposes). This is
increasingly becoming a big and separate area of study as more
entities drift into the international business waters. A perusal through
literature relating to this is a must. For instance, Ferrell, Fraedrich and
Ferrell have produced a monumental work that deserves everybody’s
20. The advent of e-business. In as much as the above challenges have to
be encountered, another problem has arisen, atleast to the huge
multinational companies that believe in a large human presence
abroad. The trend today is that a company needs not have a workforce
as a person can successfully run a multi billion dollar company from
their living room via the internet. In short, the virtual company is
turning the tables upside down. Now, all a company needs is an
updated well designed website and the company will sell itself far and
wide without much ado. Infact, it will be the clients visiting the
website to enquire and place orders. This arrangement is an advantage
to modern companies because it cuts costs, removes barriers, no tax,
minimal ethical problems to manoeuvre and has a lower failure rate of
expatriates returning home without a heroes’ welcome nor are they
disorientated at their return. In the same breathe, this development
spells doom for the ancient companies that glory in size and the
financial muscle, for they are outwitted. Unless they move swiftly,
their markets will be eroded. This new arrangement just needs a
terminal and a screen for all the transactions to take place unlike the
elaborate processes of the past. Ironically, IT encompasses all areas of
the globe regardless of the national development stage though the
least developed are disadvantaged in a sense as they do not have
critical services of the credit cards or the e-banking that takes seconds
to transact regardless of ones’ location in the world. In addition, since
e-business is in its infancy, barely over a decade old (At Thesis time),
it is in some respects difficult to quantify or measure accurately as
billions of transaction take place, either by way of placing orders or
merely just visiting the website. Steven Sleight’s book “Moving to e-
business” is an excellent starting point in investigating this new
phenomenon. Indeed, John Naisbit has aptly quipped when he wrote
International Business Billy C Sichone 42
“The revolution in telecommunications is creating the global, single-
market economy while making the parts smaller and more powerful”
There could be other problems but the above mentioned suffice for now. Let
us quickly then hurry along as we look at the cardinal elements that must be
noted before venturing into new business territory.
CazdInaI pzIoz data to Mazket penetzatIon
Now, international trade is a necessity if any 21
Century company or
individual is to succeed. There are certain key factors to be grasped before
venturing into a new market and these are the controllable factors (4 Ps,
Product, Price, Promotion, and Place) and the uncontrollable factors such
as the Political, Legal, and the cultural environment. There are 3 ways of
1. Ethocentric where goods are produced for one domestic market but the
goods go “International” as a “by the way” due to surplus.
2. Polycentric where subsidiaries are located in different countries and each
operates almost independently in that they set up their own marketing
3. Regiocentric/ Geocentric where marketing is on a global scale.
In the quest to penetrate and capture more market, the Merchant must
develop a global perspective in him/her self as well as those he/she will
work with. The orientation of International business hinges on the ability to
assess and adjust properly to impact strange environment. It also rests on the
environmental approach to international strategic marketing that differs from
domestic marketing that deals with one homogeneous market. The
homogeneous market serves people with similar tastes, cultures and habits
where as the international scene has to deal with multiple markets with
various shades of taste and likes.
Study and travel unravels the meaning of global business how that the world
has been reduced to a small place where transactions done in a remote part
of the world may have an effect on the business at another part of the world.
The trend today is that World Trade is going “Global” and as such, the
Marketer should think globally. The World economy has gone through
Source: Executive Excellence “ Multinational networks” Vol 17 # 4, April 2000 pp5
International Business Billy C Sichone 43
different cycles and phases. At one time, The USA Multinational
Corporations (MNC) reigned supreme and unrivalled. It is on record that the
century saw the world go into at least two economic depressions
between the World wars. After the wars and eventual recovery of some poor
economies, the USA & other countries started thinking “Global” in terms of
trade. The weapons that had strategically fought the trade wars in the past
were obsolete and to remain obstinate would have spelt total doom. We are
into the era of interdependence, which in effect is the most dangerous stage.
BazzIezs to Izee tzade
To curb abuse of power, various instruments were set in place to guarantee
“free and fair trade” by different countries. An association was set up to
monitor and ensure fairness in trade, and thus the first General Agreement
on Tariffs & Trade (GATT) was set up and later (1994) the World Trade
organisation (WTO). All countries that signed the GATT agreement were
expected to adhere to the rules. The decision was arrived at because Member
States used all manner of ways to protect their economies while expecting
others to open up theirs. The following were some of the barriers to trade:
1. Protectionism: through
(a) Unrealistic standards: where countries set unreasonably strict
(b) Tariffs: To protect the domestic infant industry from external
competition, tariffs are imposed.
(c) Quotas: When Governments impose restrictions as to the quantity of
goods to be imported for a given period.
(d) Voluntary export restraints (VER): where a country just decides
out of its own free volition, to restrain exports in order to deal with a
(e) Boycott: where goods are not bought for a specific reason or to press
a certain demand to be met.
(f) Monetary barriers-Either by restricting access to foreign exchange
or refusing foreign transactions like drafts.
These protectionist stands have hindered much trade.
When a country is in international trade, certain key indicators will tell
whether the economy is growing or not. The following are the key
International Business Billy C Sichone 44
1. Balance of trade-“ a component of the balance of payments, the surplus
or deficit that results from comparing a country’s expenditures,
merchandise imports with the receipts derived from it’s merchandise”
‘The tabulation of a country’s credit and debit transactions with other
countries and international institutions. These transactions are divided
into two broad groups: Current account and capital account. The main
items included are exports and imports and services (the balance of
trade), foreign direct investments, intergovernmental loans, transfer
payment, capital inflows and out flows, and changes in official gold
holdings and foreign exchange reserves’
the variance between the
income and expenditure.
2. In the past, the poorer nations could not enter the International Trade
scenario because of various adverse conditions such as war, poor
infrastructure, weak currencies, and political instability. This caused
inflation to soar out of control. Thus, the IMF was set up to stabilize
foreign exchange rates and establish freely convertible currencies.
3. Keiretsu- Found in Japan and are huge companies with numerous
associating companies. In other words, one core company at the helm
with hundreds of other associated companies like the Mitsubishi group
(Involves 160 companies, of which 124 are listed the Tokyo stock
exchange.). Each is entirely independent with its own board of Directors.
Companies today are seeking longer and more stable relationships
between vendor & supplier.
The International merchant is confronted with many parameters before he /
she ventures into a given market. A number of points must be borne in mind
as one goes about work and among these is the knowledge of the factors that
will influence the success of trade in that particular area. It is important to
know the geography of a place and how it is likely to affect the effectiveness
of trade. Some places are located in mountainous terrain while others are in
valleys were there is little or no infrastructure to support trade. The
international marketer must curve a route to overcome these hurdles and
emerge profitable. On the other hand, the marketer must study the history of
the place, the people, the culture, and how the topography has affected their
perceptions of outside influence as well as how they do things. History will
give clues as to why people behave in a particular way and how they have
The Language of Trade: A glossary of International trade terms, p30.
The language of trade: A glossary of International trade terms Page 30 by office of International
Information programs, U.S. Department of State
International Business Billy C Sichone 45
developed. In a nutshell, when about to embark on International Marketing,
it is crucial to:
1. Know the Topography and climate of the World’s nations.
2. The History of the people as to why they have developed thus
and why they react the way they do.
3. The Histories have affected international marketing, trade
links/routes as well.
4. Environmental issues more than ever before are now paramount
in today’s discussions of business. Issues such as waste disposal
have taken the centre stage.
5. The World’s non-renewable resources are fast being depleted and
must thus be carefully handled.
6. So far the United States has had the most powerful economy in
the world and as such, has abused its potency sometimes. It is
hardly surprising that the Monroe’s doctrine has been
popularized in Panama. It states that “The west must keeps its
hands off Latin America” referring to meddling Europe.
Once the history and geography has been thoroughly imbibed, it is time to
study the cultural dynamics, which is the topic of consideration in the 4
It goes without saying that cultural knowledge is crucial if one is going to
market successfully. What is Culture? We can safely say that these are the
accepted norms of practice among a local people. Each group of people has
it’s own code of conduct from which it judges things. Usually, Culture is not
written but inscribed on people’s hearts and minds. Thus, Culture is relative
and may not be the same in all the places. The Cultural aspect has various
elements that must be addressed before venturing into a given market:
1. The Language – the language must be mastered so that negotiation is
made easier. Generally people loosen up their guards and relax when they
realize that you have made an effort to know their language.
2. Material /technological – this has to do with the level of technological
and material advancements of people and how they view change in terms of
the fast changing world. The manager must be aware of the pace in order to
3. Social Institutions – Social organizations, Education, Political structures
all these border on human relations and activities.
4. Humans & the Universe (religion etc) – Each culture has certain things
that influence their view of the world. One of the major influences is
International Business Billy C Sichone 46
5. Aesthetics (Folklore, Music etc) – This refers to the arts, the music and
all the cultural ceremonies that affect the people in their setting.
The merchant must have “Factual Knowledge” as well as “interpretive
knowledge” of a culture if are to excel. He/she must also possess cultural
sensitivity & Tolerance of the varying shades of culture and nuances that are
salient in each unique culture. This calls for an anthropologist to decipher,
which the marketer should be. An anthropologist is one who studies human
behavior, reaction as well as the impact the environment has on his/her
habits. The business leaders’ task is to introduce a new product on the
market. Three reactions result when marketing internationally. The first is
resistance because something is new and strange. The second is outright
rejection because something does not relate to the culture. The third is
acceptance because the product is viewed as useful and palatable.
On the American continent, there is a mixture of cultures and this must be
taken into account when attempting to market.
The services of a cultural translator are critical as a cultural translator is one
who knows more than factual translation but interpretive as well as insight
into the cues, and nuances of a culture. As the marketer penetrates a market,
a change takes place in people’s minds due to the frequent adverts, which
influence people’s tastes and attitudes by and by. Could But we need to go
into more detail, and the fifth chapter opens that door…
One international shock a person encounters is the amount of relativity of
many things. As one ascends the international ladder, absolutes become less
pronounced and among them is the view of things, which are clearly wrong
in the one country as well as the corporate ethics. For instance, we note that
people view the commodity “time” differently due to hind cultural
orientation. The people from the Middle East and Asia are not really “time
bound” i.e. time conscious whereas the people from the west are “Time-
bound” and really precise on time. In short, Monochromic time (M-time) are
time bound and emphasise on time keeping, appointments and punctuality
while Polychronic (P-time), are not time bound.
In a Low context culture, verbal interaction is explicit and easy to
communicate and get down to business almost immediately. On the other
hand, in a High context culture, prior interaction is implicit with too many
rules and ‘ceremonies’ to be performed before you get to the issue at hand.
We must go further to say that, in some cultures, presents and gifts are not
only allowed but expected. While in the country of origin the certain
practices such as tips are forbidden, the same company that has a presence in
International Business Billy C Sichone 47
another country with the opposite view over tips, it would be difficult to do
business. The following must be taken into consideration in international
(1) Cultural imperative-These are the non-negotiables in trade and must be
known by those who are to venture into business in a foreign land.
(2) Cultural adiophora-These are optional nuances, cues and modes of
behaviour which could either be ignored or imbibed. One would not be
ostracized for not grasping these practices.
(3) Cultural exclusive-These are practices and ways that are strictly and
exclusively for the natives which a foreigner dares not learn or copy as to
do so will be viewed as an insult.
As one continues to work in a foreign country, there are certain initiatives
that they may employ and get away with as long as they are not arrested.
Some of these could be subornation (where one pays someone to do the
wrong thing that is not in line with his or her job) or Lubrication (Where
tokens are given to encourage someone do their job more efficiently).
Another aspect that must be watched is the political environment, to which
we now turn our attention.
A modern business leader must take into account the political environment
in which one intends to work because this variable is very critical in
determining which way to go. By and large, the Political environment ranks
among the highest variables before one gets bogged down with other ‘knitty
gritties’ such as the culture and legal aspects. The following factors will
influence international investment:
1. Stability of Government policies and how they will affect trade liberty.
2. Number of Political parties and their Policies.
3. Nationalism, what the government policy is on international ownership
of businesses. At some point, there was a drive by many governments to
forcibly turn all multinational companies into the hands of the nationals.
This may not necessarily mean taking over title of the said companies but all
the positions are taken over by the natives. There are a number of ways the
government can react to international investors. The following are some of
1. Confiscation- This is where the government simply takes over without
compensating the international investors.
2. Exporiation- Where there is a take over by the state but compensating
the Investor for the loss incurred.
International Business Billy C Sichone 48
3. Domestication: Where all companies are nationalised and become
parastatal with the natives at the helm. Venezuela and Zimbabwe are
When venturing in a new market, a number of political risks must be
expected such as:
1. Economic risks- How sound is the economy or will it collapse any
time? Is it a sustainable one? Is it growing and can our business blossom in
2. Exchange controls-What exchange controls on cash are there? Are we
going to be allowed to externalise our cash to our head office without much
3. local content laws- What are the local content of law? How secure is
our investment when we take it there? Is there any possibility of our losing
4. Import restrictions- Are there political restrictions on what is to be
imported and how much of it? Is there strict censuring or quotas imposed.
5. Tax controls-How high are the taxes on foreign goods? Are there any
tax rebates and for how long?
6. Price controls-Are prices freely determined by the law of demand and
supply or are they state controlled?
7. Labour problems-Is labour readily available? How cheap or
expensive is it?
8. Sanctions- Are there any international pressures laid against the state?
What type are they? Are our goods going to flow freely?
In the past, Governments were hostile to foreign investors but in the last
decade or so, the situation has changed. The following Strategies will lessen
1. When entering a country, it may well mean that Joint
ventures with the natives are entered into or
2. Expanding the investment base by joining with banks
who are owed a lot of cash by the Government so that the
Government will be disarmed from wrecking havoc as
they will be interested parties, for how can you bite the
finger that feeds you?
3. Marketing & Distribution- Ensuring that the company
holds the controlling power over the distribution world
wide so that should the Government cannot be “funny”,
or else risk losing Market for their products too.
International Business Billy C Sichone 49
4. Licensing-Intellectual property & Technology. This
licensing limits usage and is for a specific period. It may
be good to register the patent both within that country
5. Planned Domestication-This is a Systematic withdrawal
because the Government is going to decree thus “any
Government-MNC relations are generally positive if certain conditions are
voluntarily and naturally met. Some of these are:
1. Improves the balance of payments- The country befits economically.
2. Uses locally produced resources-The use of local resources is preferred
and encouraged as it is cheaper, creates employment and brings about
3. Transfers capital and technology to the locals- although the benefit
may not be seen immediately, the process brings about transference of
technology, and capital to the natives, as they earn and reinvest in their
4. Creates Jobs- Unemployment is at its height so any initiative to create
job opportunity is welcome.
5. Makes tax contributions- the government smiles if it can get something
out of the multinationals.
What other thing ought we to mind? Let as wait and see as we peer into the
The legal system position renders it difficult for a company that has its
tentacles in various countries at one and the same time. The various legal
systems that do exist are:
1. Code law/civil from the ancient Roman empire.
2. English law (Common law)- This was derived from the decisions that
were passed in local courts set by the English King.
3. Islamic law-Based and derived on from the Koran.
4. Socialist law- Developed by Carl Marx who believed that all men
should be equal and as such championed the socialist movement.
All these are some of the hurdles that the multi country corporations have
Thus, companies must agree before hand which law is going to be used in
settling any potential dispute. The following ways could be used to settle
International Business Billy C Sichone 50
1. Arbitration- where two disputing parties agree on an impartial person
to stand between and solve the problem without going into court.
2. Litigation- Simply having recourse to the law and settling the matter
in court. This is the least desirable because it has complications such as
which law to use and also dents the image of the warring parties.
3. Conciliation-a non-binding agreement where two disputing parties
agree to ask a third party to mediate the differences.
Market research is equally crucial in international business for information
gathering prior to decision-making.
What is Market research? Simply defined, it is ‘the systematic gathering,
recording and analysing of data to provide information useful in marketing
To arrive at tangible useful information, the following research process will
occur: First, we define the problem, what sort it is. Thereafter, determine
the sources of information and then proceed to gather the relevant data from
secondary and/or primary sources. Finally, analyse and interpret the data
then present the results.
On the international scenario, a number of problems are encountered.
International Market research is principally similar to domestic Marketing
though it differs in scope, information collected, information systems and
the setting up of the Multinational Marketing information Systems
Among the many options available for data collection methods is that of
questionnaires. A good questionnaire has a number of attributes such as
being brief, with ‘Yes’ or ‘No’ answers. Accurate and relevant information
is key or else large sums of cash will be wasted in the wrong direction.
Today, it is not only enough to have a huge capital base but there must be
correspondingly relevant, timely and accurate information to hand. With the
research done and out of the way, we next think about the opportunities that
Trade is slowly shifting from the highly industrialised nations to the lesser-
developed countries. Consider the emergence of China and India. What is a
Definition is from “International Marketing” by Cateora, page191
International Business Billy C Sichone 51
good market? Cateora simply states that it is an area where a target group of
customers are found that are willing and ready to buy the products. A market
has segments that must be treated differently depending on what the goal is.
A market segment then has four components that make it up:
1. It must be identifiable- can be clearly seen and picked out.
2. It must be economically reliable- stable and counted upon to work for
3. It must be economically reachable-must be accessible all the time.
4. It must be more homogeneous in its characteristics than the market as a
5. It is large enough to be profitable-Other wise it would defeat the
purpose to cut it out.
The international business guru views a country as one uniform market
while the next country is unique and so on. How ever, there are
limitations of viewing a country as “one uniform market” because:
1. The assumption is based on country variables and not on consumer
2. It assumes total homogeneity of the country segment.
3. It over looks the existence of homogenous consumer segments that
exist across national boundaries.
Whatever the case in the above situations, in the quest to identify new
markets, the following are the means of identifying market segments:
1. Age groups- Is this our target group?
2. Income classes-Do they earn enough to buy our goods?
3. Polychographic measures.
Let it be constantly be borne in mind that markets differ widely but some of
the hurdles and challenges a marketer might anticipate when eyeing a
socialist-communist country as a market for example, are:
1. The quotas- How big are the quotas and the restrictions there of?
International Business Billy C Sichone 52
2. Closed doors-This may well mean the way a country seeks to isolate
itself from foreign forces even economically. The emphasis is to use local
resources or to restrict imports from countries with similar political
3. State owned businesses- the extent and number of the parastatal
4. Corruption- The level of corruption and what is being done about it.
Can we handle such levels of corruption?
5. Instability- How politically stable is the place?
6. Resistance- what is the orientation of the natives towards foreign
investment, are they favourably disposed or not?
7. Bureaucracy- How easy is it to get a small transaction done, especially
in those key government offices?
8. Poor infrastructure- How accessible is the most remote area where we
want to reach? What about the general road network?
9. Bad or no distribution network.- Is there a systematic distribution net
work for our goods? What about the transference of our marketing
messages across the country? How long will an advert take to permeate
around the country?
It must be noted that the less developed countries are fast becoming
important potential markets (BEM)
. These include Poland, China and
India, among many others. The least developed countries (LDC) are
found in central Africa while the newly industrialized countries include
Mexico, Chile, Brazil, and South Korea, though still among the LDC.
The other important grouping is the ‘4 tigers’ of Southeast Asia. They
are economic giants led by Japan and are composed of Taiwan, Hong
Kong, Singapore and South Korea.
Big emerging markets
International Business Billy C Sichone 53
Countries need infrastructure if they are to develop and attract international
investment. What is the use of investing in a country that will not allow your
goods to flow quickly and profitably? In an age of international trade, a
country cannot afford to be averse to the MNC unlike the well-known Coca-
Cola case in India. At one time India was so hostile that Coca-Cola pulled
out of the country but now, India has had to woe Coca-Cola back.
Akin to domestic marketing, there are different segments in the world
through the eyes of the International Marketer, though the global marketer
holds a contra view. We are no witnessing the first “Global generation” of
consumers who do their shopping on the internet and from global TV net
works like CNN
. Let us patiently tarry and see what is in store as we see
the attempted regional groupings that have coloured the international
business horizon take shape and begin to work. Subsequent chapters give
insight into this aspect.
CNN= Cable News Network
International Business Billy C Sichone 54
CHAPTFR CHAPTFR CHAPTFR CHAPTFR 5 55 5
EstabIIshed RegIonaI econonIc gzoupIngs In
This Chapter basically deals with the regional trade groupings littered all
over the globe. These groups come about as countries in a region try to
coordinate activities in terms of trade so as to reap the best mutual benefits
from within the region. Usually these groupings come up with standards and
terms of reference to which all the member countries must subscribe such as
reducing tariffs on goods from within the grouping but raising them on
foreign goods from outside the catchment area. A number of International
agreements have been entered into which address different aspects of
international trade. The GATT
↵ ↵↵ ↵
(WTO) is a case in point. Most of the
groupings are localised whilst being regulated by international principle laws
such as the fair trade law. This law seeks ensure that fair trade practices are
observed in international trade. Some of these groupings are:
(g) The USA/Canada Free trade area.
(h) COMECON- Council for mutual Economic Assistance, by the USSR
council for mutual economic assistance of socialist countries.
(i) NAFTA- North American Free trade area
(j) Mercosur- Southern Cone common market found in Latin America
(k) AFTA-ASEAN Free trade area-found in the Asia Pacific Rim
(l) CEA-Chinese economic area
(m) EU- European Union
(n) CEFTA- Central European Free trade area.
(o) ASEAN-Asia Pacific rim including Japan, Taiwan, south Korea.
Recently, China has linked up the grouping making this the largest
economic grouping housing a 1.7 billion people market- BBC news 5
(p) SADC-Southern African coordination conference
(q) COMESA-common market for East and Southern Africa
(r) NEPAD- New partnership for African Development
(s) PTA-Preferential trade area (now defunct)
(t) ECOWAS-Economic community of West African States
GATT= General agreement on trade and tariffs: WTO= World Trade organization
Refer to the Africa Connexion magazine Volume 9 2
qtr 1994-very insightful for the African groupings.
International Business Billy C Sichone 55
It is believed that in Future, Multinational markets are likely to increase.
How ever, two views have been advanced
1. Regional economic Blocks will dominate the world trade scene.
2. New markets of developing countries will be key such as China.
The future economic groupings must harmonise if their efforts are to give
dividends. Harmonisation is the mutual recognition, to work together, on
some set standards. Not only should there be harmonisation but reciprocity.
Reciprocity is simply the condition of being reciprocal, mutual action, a
‘give and take’ situation.
A third postulation about the future trade is that it will be region less, as
people advance to use e-commerce and the advent of virtual corporations.
What are the strategic implications on marketing, yea, the International
Marketer? Despite all the potential advancement and the increased ease of
communication and interdependence, we think that the problem of language
will still linger. Also, the one global market concept if realised, will lessen
the barriers as well as blocking those out side the regional block. The latter
implication is rather negative some what but it is one of the ramifications
never the less.
Having seen the frantic effort people have made and we now consider some
marketing strategies to help us in our quest to penetrate and capture those
In attempting to develop global marketing strategies, the potential investor
must carry out a SWOT analysis where there is a deliberate move to ‘count
our men’, as it were. Inherent strengths, weaknesses, opportunities and the
threats that might come as a result of attempting to penetrate the target
market. With that out of the way, the strategic planner must define what their
goal is whether domestic, international or global marketing. Once agreed,
the marketer proceeds to formulate the strategies that will cover the whole
world as one market for example. In the case of International Marketing that
is based on the premise that each foreign market requires its own culturally
adapted strategy, appropriate methods will be employed. The primary
difference between global and international business is orientation.
Among the ways of penetrating a market is by partnership, Joint ventures,
part ownership and franchising. Franchising provides a standard package of
products, systems, and Management services, and the franchisee provides
market knowledge, capital and personal involvement in Management.
International Business Billy C Sichone 56
Franchises include soft drinks, motels, retailing, fast foods, car rentals,
automotive services, recreational services, and a variety of business services
from print shops to sign shops. Franchising is the fastest growing market
entry strategy. There are three types of franchise agreements extant:
1. Master franchise.
2. Joint venture.
Since the customer demands high quality standard goods, total quality
management (TQM) is essential. In addition to the quality standards, there
is need to establish local relationships that focus on the marketing process
(Relationship marketing), strategic business alliances, partnership and joint
ventures. Where Joint Ventures are preferred, it is prudent to know the four
factors associated to this mode. These are:
1. That Joint Ventures are established, separate, legal entities.
2.They acknowledge intent by the partners to share in the management of
3. They are partnerships between legally incorporated entities such as
companies, chartered organisation, or Governments, and not between
Another key thing in joint ventures is that there must be equity positions
held by each of the partners. Unfortunately, these strategic alliances fail half
the time. Among the major causes of this is the lack of perceived benefit by
some partner. The second is differences in management style or differences
in goals. This has happened often as was the case in the VW & Ford case
where they differed on strategic plans. If you will recall, TQM is a must in
the global competition because quality carries with it a competitive
advantage where a company can eke out a niche that takes time to dislodge.
The benefits of TQM lies in the fact that:
1. It helps the firms produce goods and services that more than meet
customer expectation and continuous satisfaction.
2. It is a corporate strategy that focuses total company efforts on
manufacturing superior products with continuous technological
improvement and zero defects that satisfy customer needs.
The customer’s changing needs are identified through market research. This
emphasizes the real rather than the imagined customer expectations.
Further more, formulated quality control systems for all functions are
International Business Billy C Sichone 57
everywhere not just in the manufacturing sector. The goal is to have quality
in built within the system. Needless to say, the customer defines quality.
He or she is enthroned and dictates what and how it is to be produced.
Further more, Total quality management has worked wonders in Japan by
reducing costs. This is the silver bullet sought by everyone in the world.
TQM has also some how contributed to the successful procession to
globalization. What, after all are the benefits of globalization? These are few
and soon told.
1. Economies of scale and Marketing are achieved.
2. Transfer of experience and know how across countries.
3. Uniform global image e.g. Coca-Cola or Colgate.
4. Control & coordination of operations easier, cheaper and less complex.
Quality is a must and can only be ignored at one’s own peril. Chapter 12
takes us to the export trade mechanics and logistics.
Today, the regulations and restrictions of exporting and importing are very,
much around, even in the world leaders of trade like the USA. The major
goal of these regulations is to watch what is exported and imported. This is
especially true of the strategic goods to certain countries and also from there.
The major reason for this is basically to protect the domestic industry from
unfair external competition as well as to conserve foreign exchange. In many
countries, the economy is both extremely weak and fragile where poor
quality and expensive goods are produced. These mediocre goods stand no
chance of competing with the cheaper and higher quality foreign products.
In a country therefore, there are certain ways to get things done. This is by
logistics. Logistics are a total systems approach to management of the
distribution process that includes all activities involved in physically moving
For example, in terms of transferring goods by either sea or land, the foreign
freight forwarder is licensed by the federal maritime commission. The said
freight forwarder arranges for the shipment of goods while acting as the
agent for an exporter. In this case, an exporter, instead of transporting the
goods him/her self in the international environment would use the services
of a foreign freight forwarder because of the following reasons:
1. It is cheaper in the long run.
2. The forwarder knows the local “rules” and would easily manoeuvre
around where the exporter would falter and lose time in the process.
International Business Billy C Sichone 58
3. It is also less cumber some to the exporter- the agent manages the daily
hustle and bustle that goes with the transference of goods.
4. It gives a strategic out look to the exporter because the forwarder will
be swift to deliver while the exporter will invest energies in other on
coming worthy causes.
That not with standing, the International Marketer will encounter a lot of
restrictions and hurdles as he/she seeks to plough through the maze of the
international market. Among the major import restrictions will be the
1.Tarrifs- The charges on imports so that the local industry is protected
2.Exchange permits-Permits allowing the exchange of goods
3. Quotas-The restricted amount of imports allowed within a country.
4. Import licenses-Licenses to allow one to import certain goods only.
This restricts trade.
5. Boycott-The deliberate decision not to buy certain goods in order to
press certain demands to be met by the other party.
6. Standards- Set standards, which must be, met failure to which foreign
goods are rejected.
7. Voluntary agreements- non-binding agreement between parties over
Despite all the hustle and bustle, the day is coming when most of these
hindrances will be past and forgotten. For now, we content our selves and
hope for the best.
A product is more than a physical item; it is a bundle of satisfactions
(Utilities) the buyer receives. As such, when attempting to sell
internationally, the seller must make sure that the products are savoured with
all the desirable traits, are acceptable universally and viewed as helpful and
desirable by the consumers. Stress must be given here because Global goods
must be made to a certain quality, cost, and culturally acceptable universally.
This calls for hard work diligence, open mindedness and a willingness to
watch the market meticulously to establish exactly what the consumers want
and need, not merely what we ourselves perceive to be the need. This may
well not be the case! As such, the following factors must be taken into
consideration as they influence the acceptance and diffusion of goods:
(a) Newness of innovation. Generally, people are cautious initially until all
fears and suspicions are allayed.
International Business Billy C Sichone 59
(b) Complexity of use. Is it user friendly? The more easier to use, the better.
© Usefulness/attributes. How useful is this compared to the last thing?
(d) Brand name, country of origin. How well established and reliable is this
(e) Life cycle of a product is the level at which the product is in terms of
quality and consumer acceptance level etc.
Today, as earlier intimated, green marketing must be taken into
consideration especially in Europe.
The global market is dynamic, thus the marketer must ensure that the exact
needs of customers are known before goods can be produced in mass.
Notable also is the growth of the service industry where products are not
tangible physical goods.
The fundamental characteristics of services are: they are intangible products
whose intrinsic value is the result of performance, or an occurrence that only
exists while it is being created.
Characteristics of services are that:
1. They may be perishable-once created, it cannot be stored but must be
consumed simultaneously with its creation.
2. Not transferable
3. Heterogeneous-individually produced.
4. Inseparable from its consumption.
5. Services are either consumer or industrial.
This type of marketing must also meet certain international standards as laid
out by the ISO 9,000. ISO is an internationally accepted standard for quality
of goods, processes and services. When a product or company is ISO
certified, then it is assumed that the goods are without defect and can be
relied on. To be certified, the processes must guarantee the highest quality
out put. This shows security and guarantee of good quality goods. The
modern trend is to trade only with ISO certified clients because the
certification acts somewhat as an assurance that the products are of the
highest quality standards. Industrial products are items/machines used for
mass production-the aim is profit (service industry). Products must satisfy
the buyer so that the quality goods are produced- Total quality management
(TQM) also comes into play here as it is integrated into all products and
We must however bear in mind that countries are at different stages of
development and thus the level of standards of goods will equally vary by
the same token. There are stages of development in countries. The first
International Business Billy C Sichone 60
stage-is the Pre industrial where the country does not have any basic
foundation and infrastructure to support any meaningful development due to
poverty, policy and culture. Examples are the least developed countries
(LDC) where debt and poverty have ravaged the economy so badly. The
second stage is the industrial level, where the country moves to the stage
where it begins to develop the primary manufacturing industries. It is
from these that the building blocks of the economy are formed, and usually
at this stage, the product quality is poor and begins to improve in the next
stage. The third stage results from having slowly built enough muscle to
accelerate in the growth of the manufacturing industry. This stage
witnesses the rapid proliferation of multiple varied industries that specialize
in different economic goods. The fourth follows the third stage that
translates into the well-industrialised economy where goods are produced
on a large scale with economies of scale reached. It is at this stage that the
country begins to have surpluses and also the problem of disposal becomes
evident a major concern. This is the stage where many countries in Europe
have reached. The fifth and final stage where the apex or complete
industrialization is reached and is the desired goal for many a country.
Very few countries have reached this stage where every thing is in its perfect
state. It must be highlighted however, that there is always room for
improvement, in the area of having minimal pollution effluents discharged to
the environment. Japan, USA and Germany are some of the countries that
are approaching these stages. But how does a LDC sell and market goods to
a completely Industrialised country which has high quality standards that are
well above the mediocre quality goods that are churned out from the wheels
of a non ISO company? How can this hurdle be surmounted?
In Marketing to any of the countries at various stages of industrialization, the
Countries use any opportunities that avail themselves. Some of the avenues
where goods are marketed are through trade shows to exhibit and
demonstrate to potential users. It must be noted that the trade shows attract
high-level decision-makers who ultimately influence the buying trends of
When all the marketing and net working is done, we move over to the
distribution channels that will be vehicles for our goods.
There are many channels of distribution that are employed from place to
place to ensure the safe and speedy passage of goods across the world. For
instance, in Japan, the channels are multi layered while in America, the
structures are simple. On the side of the company, this is a good avenue for
getting prompt feed back. These agents come in various shades and
International Business Billy C Sichone 61
contractual agreements entered into. The said agents can either have no title
to goods or operate as merchants who have title of goods. Agents use parent
name and are not independent while merchants use their own name and have
title to goods. How ever, control is important for parent company in the
foreign country for effectiveness. Clear agreements must be entered into
prior to commencing to implement the deal. Note that the Japanese believe
in many middle men and the choices of the said middle men depends on
company policy either to:
1. Establish own subsidiaries or
2. Appoint some agents, one for the home country and another for the
“abroad one”, whether to take title to goods or not. In some countries like
the Nether lands, the Middlemen are Government affiliated where 90%
share ownership is by the Government unlike in places like the USA where
there are no merchant middlemen used. This is a sharp contrast considering
that both are capitalist countries.
We hurtle to other aspects of the distribution channels-What must be looked
at when choosing agents and merchants. When locating, selecting and
motivating channel members, the following are looked at:
1. Locating- this involves a general look
2. Selecting-This entails picking the best from among many questions
such, as ‘Are they cheaper, the best, interested and loyal?
3. Motivating- We should always be looking for ways and means to
motivate our net workers and consistently so. A motivated workforce can
unleash more than we would ordinarily expect. This could be by magazines,
newsletters, encouraging them to visit the Head office, advertising etc. The
customers can be reached in various ways such as:
1. The use of direct mail distribution has several advantages over the
(a) It is cheaper
(b) Cuts bureaucracy
(c) Challenges old paths.
(d) Cuts down on work force
(e) Successful way of entering a market.
Having asserted the above, we hasten to say that middlemen are needed in
certain markets because:
(a). There is minimum investment on the part of the company some
International Business Billy C Sichone 62
(b) No company personnel or major expense of managerial effort
The disadvantages are equally many such as:
(a)The Export Management Company (EMC) seldom affords to make the
kind of market investment needed to establish deep distribution for
(b)Commission drive is so costly some times that people rush for the
extra buck at the expense of doing a good job.
(c)Cannot operate short term but on a long-term basis.
The factors affecting choice of channels of distribution are:
(a)Identify specific target markets within and across countries.
(b)Specify marketing goals, in terms of volume for example.
(c)Specify financial and personnel commitments
(d)Identify control, length of channels etc.
To be successful in a chosen distribution channel, the following ‘6 C’s’ must
1. Channel- Is the channel ideal?
2. Cost- Is it cost effective?
3. Capital- Do we have the financial muscle to set up and sustain such a
4. Control- Can this framework be effectively controlled?
5. Coverage-How much of our desired market catchment area is
6. Character and continuity- Is the character of channel favourable? Is it
in keeping with our goals? Are there any potential threats that might cripple
our operations? The difficult parts that must be addressed by the Norazi
agent. A Norazi agent is one who specialises in shady or difficult
transactions such as contrabands.
The effectiveness is directly dependent on the selection of middlemen and
on the degree of control the manufacturer can and/or will exert. But how
then can a marketer go about advertising goods in a global market? Another
volume effectively deals with this question.
International Business Billy C Sichone 63
When it comes to advertising, many variables come into sharp focus. The
International advertising tailors its adverts uniquely different in each market,
Global advertising has to do with advertising in the same way across the
world. Other wise, the product is advertised as one uniform brand, assuming
that the world is one huge market. In the international market pattern
advertising is employed because:
(a) Each region is regarded as unique at least culturally.
(b) There is a move towards homogenous tastes but not yet.
(c) Some products have “uniform application”- similar tastes and needs.
(d) Apart from advertising, there is the sales promotion. This is a short-
term effort directed at the consumer such as Price cuts and raffles to
create more sales.
The sales promotion is designed to achieve such special objectives as:
1. Consumer- product trial and/ or immediate purchase.
2. Consumer introduction to store.
3. Gaining retail point of purchase display.
4. Encouraging stores to stock the product.
5. Supporting and advertising & personal sales efforts.
However, the communication process and advertising sometimes misfires
due to misunderstandings. Advisors can over come the problems highlighted
above by engaging interpreters/translators living in that foreign land.
Alternatively, the local people can be used or those that know the cultural
cues and diversity.
The local market characteristics, which affect the advertising and sales
promotion of products, are:
(a) Culture-The orientation and the set norms in a particular region.
(b)Tastes- what people like and approve of.
(c)Perception/decoding- How well exposed and developed their minds
are to accept foreign and new views/products.
(d)With the advent of the Satellite TV, the Marketer is able to reach
many countries since the world is viewed as one market. Thus, the
goods are standardised, using the same Logo. As a result, it is hoped that
slowly, the media is creating a uniform perception of standard products.
It is believed that the global consumer generation has already budded.
For example, when the youths in Japan watch TV about what the Youths
in the States wear, and next time you see them wearing the same!
International Business Billy C Sichone 64
A number of critical steps in International marketing must be observed and
the following six steps involved are:
(a) Study the target market and see where one may need to modify things.
(b) Determine the extent of worldwide standardization.
(c) Determine the promotional mix-by the national or global markets.
(d) Develop the most effective message(s) that will carry the word
(e) Select effective media. For example, such international media as the
CNN may be ideal because it is live and has a global coverage 24 hours a
(f) Establish the necessary controls to assist in monitoring and achieving
worldwide marketing objectives.
The Marketer must be aware that there are two extremes that must be
loathed in the advertising debate:
(a) The International Marketer argues that every country/region is unique
and deserves a unique type of advertising while
(b) The global Marketer holds that there should be one standardised way
of advertising, over looking regional differences altogether.
Global brands generally are the result of a company that elects to be guided
by a global marketing strategy. Global brands carry the same name, design,
and the creative strategy everywhere in the world; Coca cola, Pepsi-Cola,
McDonalds, and Revlon are but a few of the global brands.
Further assertions are that:
(c) “Companies have discovered that the idea of complete global
standardisation is more myth than reality”
(d) An important reason for uniform promotional packaging across
country markets is cost savings.
(e) Standardisation does require advertisements to be country or culture
neutral, other wise they do not work…
With the advertising hurdle out of the way, the international Manager must
now take an internal look so that the manpower within is in place and his/her
expanding and diverse work force is well catered for. The ensuing chapter
handles this aspect. Let it be noted that for our present purposes, this is the
heart of the research at hand. Therefore, we ought to move slowly here,
for we are about to ‘walk on hallowed ground’. Let us therefore remove our
EssentIaI attzIbutes oI an InteznatIonaI nezchant
International Business Billy C Sichone 65
The International Management practice radiates the brightest when we look
at the subject in more detail. All along, the Management of personnel and
work has been latently alluded to but here, it is transfigured as it were, for
our peering into. As you will notice, the profile of the global Manager is
interesting because the said manager could be recruited from any point of
the terrestrial ball. Gone are the days when only local staff could be the ones
recruited for a job. Now, any one can take up the job as long as they have the
right qualifications and the acumen to feature on the international scene. In
that case, the Manager must be very versatile, active and multitalented to fit
in well in varying environments. As such, there is need to be multilingual by
mastering more than one language as well as they unspoken cues that go
along with the local culture.
In addition to the aforementioned point, the International Manager can lead
from any country and base. Thus, International experience is crucial for the
present and future global manager having a wide mind and rich exposure
internationally so as to objectively handle staff problems of various shades.
For example, the need to empathise and understand the local situation yet to
keep a global focus is key to the success of manager of a diverse work force.
Closely tied to what has been mentioned is the need to learn to motivate
staff. How can one discern the aches and needs without empathizing with the
workers? Were we to use Standard American motivation practices, they will
most probably be out of taste with the local scenario. Thus, there is a way in
which one must know the best way to reward and motivate a diverse
cultured work force, although still keeping within the corporate culture and
goals. The person who will be an excellent international beacon must
possess the following cultural skills:
1. Maturity- One who is wise and able to handle diverse and
sometimes radically different cultures competently.
2. Emotional stability-The person must not be moody and
unpredictable. In one moment, very warm, friendly and sociable but in
the next hostile, argumentative, bigoted and throwing tantrums all over
the place! The Manager must hold him/herself in all situations whilst
keeping his/her head in all situations.
3. Considerable breadth of knowledge- It is not enough to have the
financial backing or the acumen, but rather, knowledge must be first
resident in the brain and from that platform then launch to deal with each
case as it rears its multicoloured head! The Manager must have a broad
knowledge in terms of geography, history, culture, local politics, policies
and the possible strategic routes to employ. He/she must also know the
International Business Billy C Sichone 66
strengths, weaknesses, opportunities and threats that confront the fate of
4. Adaptability-Having acquired the knowledge and acumen, the
manager must also have an ability to adapt to the circumstances
prevailing so as not to appear out of step with the times. In other words,
the understanding must trickle down to the heart where it will affect the
will to accept the situation and do the best to reap maximum benefits
both for the organization, employees and the local community. Half the
time, the will revolts to stay in a given place and thus, the manager,
though knowledgeable and apt will pack his/her bags and return home as
5. Good attitude and effort- this aspect is closely connected to the
above-mentioned point but has more to do with the mindset and the
inward disposition that one has towards life. If one is strictly ruled by
his/her SRC, they will display a bad attitude and thus put in very little
effort. Usually, such have a defeatist attitude to a point where even their
minds cannot think objectively or strategically.
6. Positive out look- having said the above, the good manager then
must cultivate and have a positive out look to whatever situation that
confronts him. Optimism should be the hallmark of a good International
But that is not all, some further traits are:
(i) Communication- Our lot falls in an interdependent world as well as an
information age. It is therefore not advisable to keep to oneself and only
release ‘Press statements’ at irregular intervals while the rest of the time,
pitch darkness reigns within the organization. Clandestine, authoritarian and
‘commando-like’ managers are out of step with the modern management
trends. Effective communication is the key to every thing today.
(ii) Respect-The manger must have due regard for others and not ‘ride a high
horse’ where no one is viewed as important as the self. Many an
international manager has wrecked their potentially glittering career by
arrogance and pride, although they had unrivalled plans.
(iii) Tolerate ambiguity- The Manager must have a high tolerance level of
uncertainty because of the dynamic nature of the international scenario.
Some people cannot stand being in limbo for long and easily get frustrated,
but not so the good manager. Instead, he/she watches the motions of the
market and comes up with a pattern over time and yet always giving
allowance for sudden change. This calls for patient endurance and resilience.
Analytical and logical people are the most in need of this grace of patience.
International Business Billy C Sichone 67
(iv) Display empathy-Must be able to feel and imagine oneself in the shoes
of the person needing help. Without empathy, it is impossible to appreciate
and rightly apply the correct remedy in a given situation.
(v) Non judgmental- half the time, without our consciousness, our SRC
affects the way we judge things and situations. Our prior training, orientation
and culture have a more potent influence than we realize. For instance, what
we have termed as ‘moral and right’ may not necessarily be the same
elsewhere. Thus, the manager must not be dogmatic nor condemn others for
holding on to a contra opinion and practice.
(vi) Recognise and control the situation aptly and quickly. The astute
Manager’s sharp eagle eye must see things and quickly devise a solution
long before it happens. This is a rare strength but the good International
Manager possesses that discernment and uses it appropriately to handle
(vii) A good sense of humour- Laugh off things and not take things too
personal. Care of course must be taken not to trivialise even important and
(viii) The right business acumen and tact. This should be one of the
overriding traits for one to strike deals and get things going. Many people
have the cash, information and brains but lack this charisma to articulate
issues well. This is especially helpful in areas where a lot of prior
negotiation has to take place before hitting gold.
The work of the international Manager who leads people has to contend with
various attitudes, beliefs, cultures, and values of the local condition. For
instance, in the United States, the company business takes precedence over
family and relations where loyalty is given to the entity. In Latin America,
the opposite is true. Further more, in the USA, the entity concept of the
organisation is espoused strongly while in other places, the entity cannot be
separated from the people. Another difference is the way people view their
jobs in a particular organisation. In the West, working for a particular
organisation is not viewed as life long while in places like Japan, people
devote themselves to one for life along side other relatives and friends. The
work relationships are more personal and founded from culture and family
while in the States, the grounds of hiring some one is not family attachment
or prior knowledge but largely on merit. We may even add the attitude
towards working hours as a difference! A Japanese worker will toil tirelessly
until the work is complete everyday without minding the knocking off time
while an American will content him/herself with the 8 hour schedule, pack
bags and go home, whether the work has been accomplished or not! All the
International Business Billy C Sichone 68
above attitudes influence out put and reactions of people towards their
vocation. The international businessperson must contend with and contain
all these variations.
$et backs encountezed by IndIvIduaIs on InteznatIonaI
In global management and business, expatriates are an integral part though
this trend is changing. Now locals or third country nationals can act as
managers because they are sometimes better emissaries and will know the
way better. Although an international career is plausible and admirable,
ironically, many would-be Expatriates are reluctant to leave their countries
because of the following undesirable traits that go along an international
1. The “out of sight out of mind” syndrome seems to grip the sending
company head office. There is a sense in which the person on an
international assignment is “forgotten” about as soon as they leave the
head office doors. For instance, the expatriates do not get information on
time, are treated, as not part of the “home team” and neither are they
consulted on major decisions, even on ones that affect the very stations
they lead. In short, there is an absence of that sensible feeling of
belonging but rather replaced by the feeling of alienation.
2. Lack of career development. It seems that those that remain at base
get preference treatment in terms of training, have better access to
resources, are in constant touch with the “known quantities” at head
office and thus develop rapport, network as well as friendships to the end
that they are naturally recommended to higher tasks while the expatriates
in the fringes of civilisation are relegated to the promotional terraces.
When the said expatriate returns home from abroad, this discrepancy is
so vivid as one compares with peers. Obviously, one feels “robbed”,
cheated and demotivated.
3. Another hair-raising issue is the re-entry “inconveniences” that
accompany settling back home. When the expatriate family has been
away from home for a number of years, many variables will have
changed and as such, there is need to prepare for another “culture shock”.
Some of the inconveniences faced will be the change of status, earning
power, new job descriptions or unpredictable and ambiguous challenges
daily, the change of station for the family in terms of friends, pace of life,
school, food, dress codes, liberties and even attention given. Sometimes
International Business Billy C Sichone 69
the expatriates may not have had an opportunity to own property whilst
away from home due to restrictions. In some cases, they may not have
saved up to buy a house and when they return to base, they feel as though
they have “crash landed” thus shooting up the stress levels. Relocation
can be traumatic and stressful if not prepared for psychologically way
before. Obviously, no one wants to be or feel disoriented or stranded! We
all want to be in control of our destiny.
4. Further still, the Lack of adaptation by family to a strange
environment is an issue to be pondered upon long before venturing out on
an international assignment or else the sending company stands to lose a
lot of money as the expatriate family abandons ship for home. In such
times, the family completely fails to adapt and as such the family must
get back to base where the entire family feels comfortable. This is a very
painful decision for the head of the family because whilst he/she can
cope, the others will not be able to stand the stress thus contributing to
the morbidity rate of the said family. This aspect cannot be over looked,
as the family is an integral part of ones’ livelihood and team. It is
therefore recommended that the family under go adaptation-training
sessions long before the shift takes place. As we all know, people
naturally have an inborn “inertia-meter” to change but if sweetly and
meticulously handled, the family might just buy the same lenses and
begin to view things in the same light.
Although we have already alluded to it above, we must stress that the
business leader of tomorrow must be at least multilingual. The process of
learning another language apart from the mother tongue can be quite
unsettling for many a person, especially for the American who assumes
every one somehow knows or should know English. The natives equally
expect the same of the expatriate at hand. The dictates of learning a new
dialect shuts many a door of prospective expatriates because taking up the
job may entail the family radically switching to another language. Further
more, it may be that the success of the job hinges on the mastering of a
foreign language as well as the cues thereof. Some one must learn languages
such as French, Spanish, Chinese or Italian to succeed. This is an
insurmountable task for some. The precipice is too steep.
As though the aforementioned points were not enough, the Manager must
learn the culture, values and attitudes of the locals if to be effective. The
cultural aspects cannot be dispensed with that easily because for many an
entity, success rests on the cultural, dialect and cue knowledge. It is
International Business Billy C Sichone 70
interesting that the natives are very keen observers of anything new. If it is a
person from another cultural setting, somehow, unconsciously, they feel that
person must know their expectations in terms of their own culture. As such,
if the international manager does not display any knowledge of the local
values, the natives feel threatened, insulted, belittled, despised and thus
develop animosity towards the marketer although he/she might be the herald
of good tidings. As a result, the locals will not look at the products
objectively and not be responsive towards the marketed goods. They will, as
it were, keep an “arms’ length”. Thus, the product may turn out a dismal
failure as very few will buy or market the product to others.
Keep in touch with expatriates so that they do not feel “left out”. As was
intimated in (3) and (4) above, the expatriate families feel cut off from the
base, much like how an astronaut would feel without either the lifeline or the
Space Manoeuvring backpack. They feel unsafe, unimportant, irrelevant and
without assurance as to whether what they are achieving is plausible.
Naturally, we all need some commendation or a pat on the back. Further
more, people feel encouraged when they are urged on or consulted on some
seemingly trivial matters. The fact that they know something about what is
going on will settle many a hiccup.
Having asserted the above from the perspective of the expatriate, we now
proceed to state that it is costly to maintain an international sales force as
well. The following reasons come to the fore:
1. Cost of living allowances are high: To send some one on an
international assignment is costly business because you pluck them out
their “natural habitat” and plant them in a foreign environment. As such,
that loss of home creature comforts must be atoned for by ensuring that
the new setting is as close to and as comfortable as the home country. For
example, the children of the said expatriates may have to attend the
international school as well as provide incentive allowances for being
away from home. In the distant past, the author of this review perceived
an international assignment as a great privilege above all else. The
present mindset is that not all is rosy when one considers all the
parameters and the opportunity cost attendant to the international job. In
as much as it is more lucrative, there is the emotional cost and family ties
that must be dealt with rather ruthlessly for a while. But that not with
standing, the well adjusted International Marketer will brave the
“weather” and stand firm against all odds, all things being constant and
equal. The International manager must be ready for change at all times.
International Business Billy C Sichone 71
As some one has aptly quipped, “the only thing that is constant is
- Not even much money can replace the home serenity. Yet
maintaining an expatriate abroad is expensive business, akin to sending
the Space Shuttle for six months in space.
2. Salaries in “Dollars” and higher than average: As earlier intimated,
to post some one on an international assignment means what they get is
more attractive than at home. If there is no incentive, many would opt to
remain home or quit all together. Let it be known also, that the higher pay
acts as a potent motivator making it worthwhile to remain abroad. As will
be noted, those that earn much on their eight-hour job will rarely look for
another job in their free time but those who get very little will scrounge
for as many jobs as they can to survive, all the while disillusioned and
discouraged. By that token, it is justifiable to pay in an international
currency such as the Dollars and at a higher rate, depending on the cost
of living. For example, if one lived in the Nether lands, they would need
to earn a lot to be comfortable because of the high cost of living. Were
we to convert the same to our local currency such as the kwacha, it would
shock many of us at the multi figured salary!
3. Transport, lodging of expatriate to and from country of origin as
well as locally: Obviously, the expatriate family must be well catered for
during the transition period, whilst abroad and on the way back home. All
these are huge costs but necessary. One has to bear in mind that these
selfsame people are the ones carrying the company flag and image
wherever they lodge. Naturally, we all like keeping up good appearances
wherever we lodge and so, will do our utmost to provide a conducive
environment. Underlying this whole process is the motivation of the
potential expatriate family so that the impact is minimised.
In the ensuing chapter, we digress briefly to consider DFI in the
context of IB. We resume our regular discussion there after.
Author of saying unknown to this article writer.
International Business Billy C Sichone 72
CHAPTFR CHAPTFR CHAPTFR CHAPTFR 6 66 6
Direct Foreiqn Investment, its pros und cons
Many of us wonder what Foreign Direct Investment (FDI or DFI for short)
is. What is it, where is it found and how does it affect all of us? For many a
Zambian, FDI sounds a totally distant concept far out there with no direct
bearing over our lives at all. Thus, many ignore it but suddenly wake up in a
mad frenzy when it touches their pockets and then return to sleep shortly
afterwards. In recent days however, especially after controversial
privatization process and sudden discovery of China, many of us are quickly
coming out of our wood works trying to get to grips with things so that the
new dealers’ government should not out wit us once again after “swindling”
the nation of the mineral royalties, senseless tax holidays and the apparently
clandestine sale of the ever vibrant ZANACO in the name of “investment”.
Indeed, the 1992 Zambian privatization act # 21 triggered a spiral that we
shall live to grapple with for many generations hence. The ZPA website
(www.zpa.zm) offers deeper insight into this animal called “Privatisation”
and to some extent, DFI.
Perhaps, it would be fitting to commence by defining what basically
“Investment” is before we consider it from an international perspective for to
assume that we are on the same page in terms of understanding constitutes a
serious error. Investment is defined variously among scholars but in capsule
form, it can be loosely defined as “a deliberate delay in consumption of
resources to a future date so that the resources ferment, thus paying back
higher returns”. This definition presupposes certain things such as the
availability of resources, a willingness to sacrifice immediate self-
gratification/ consumption, a risk factor as well as a profit motive that
accrues at a future stage. Winfield and Curry have defined it as when “either
individually, as a company or as a country, we forgo the consumption of
goods today in order to achieve greater consumption”. They go further to
state that time and risk are of essence in investment. A more thorough and
scholarly definition by Reilly and Brown reads “ An investment is the
current commitment of dollars for a period of time to derive future payments
that will compensate the investor for (1) the time the funds are committed,
(2) the expected rate of inflation, and (3) the uncertainty of the future
payments. The investor can be an individual, a government, a pension fund,
International Business Billy C Sichone 73
or a corporation.” Clearly, we can safely deduce that investment is a day to
day activity that we engage in though at different degrees and expectations.
The principle is a higher future return on present investment. But as it relates
to business, as the quoted definitions have shown, it is usually a financial
commitment with a calculated risk to foster a better future outcome. Thus, if
you deposit money in a fixed deposit account for a period of time, or buy
treasury bills and bonds or indeed you invest some financial capital
(although other resources like fixed assets are allowable) in a ‘ka ntemba’
you are an investor because you fore go an immediate gratification. The
essence of investment is profit, a better future, higher dividends, power,
influence or status. The motives vary from entity to entity. Thus, when a
person comes to town, takes over a business, puts in a capital injection to
kick start or revamp an ailing business concern, property or improve the
environment, they are investors. If a Tonga man from the Southern province
acquires and develops a farm in the Northern Province, s/he is a “local
investor”, local in the sense that s/he is a Zambian investing within Zambia.
If a Chinese traverses the terrestrial ball to start or buy a mine, in Zambia,
that is a different ball game as we shall see later on in this write up.
When we consider foreign direct investment, our focus shifts slightly to the
international plane where we talk about multi national investments from
individuals or concerns that would like to reap from or change the face of a
particular place, people or landscape by pumping in resources (usually
finance) from abroad. This is direct foreign investment in the simplest terms.
In other words, we can say that direct foreign investment refers to the direct
infusion of resources from one country to another by an entity or concern
usually with a profit motive. Roger Bennet does not specifically define it in
capsule form but does a good job highlighting that DFI has been around for
over 150 years but interest grew when the large US multinationals begun to
cross the Atlantic into western Europe after 1946. Charles Hill on the other
hand defines it in passing in his book “International Business” when he
states “FDI occurs when a firm invests directly in facilities to produce and/or
market a product in a foreign country”. Hills’ brisk definition broadens the
investment scope beyond just the financial aspects that most of us are
accustomed to but includes investing in (1) a foreign country (2) in facilities
(3) direct investment and (4) production/service with a profit motive. Thus,
when the crippled Zambian economy finally ground to a halt as far back as
1985, the only recommended option was change the laws that paved way for
DFI as well as privatisation. As we all know, this did not actually take place
until the turn of the next decade when the Dr Chiluba led team bravely and
International Business Billy C Sichone 74
radically turned the tide by unblocking all the valves that had hitherto kept
away investors. The floodgates attracted many characters of all sorts of
shapes and sizes who poured into our richly endowed nation that virtually
did not have intrinsic capacity to exploit the vast resources at the time to
thereby changing our fortunes. In principle we can say that it was a brave
day when the MMD government led the way to changing the law from a
socialist to capitalist leaning economy. With all their faults, the initial MMD
team is to be commended and only posterity will condemn or acquit them.
Having briefly defined terms, we venture to ask why FDI should be
espoused and whether it has any tangible benefits. The first question is
simpler in that from the scenario earlier painted about the stagnant Zambian
economy of the second republic, it became evident that the only remedy was
a direct infusion of resources from other potent partners given that the
majority of Zambians are serious paupers despite having some of the best
qualified people in the world at the time. The Nation had a great natural
resource base, a whole load of unprofitable companies and a crippling
unsustainable debt burden. As though that were not bad enough, the
command economy inhibited realistic economic indicators that would have
rendered many businesses unprofitable given adverse practices such as price
controls, government interference, prohibitive laws and a failed or weak
entrepreneurial spirit among the nations’ citizens. The Zambianisation
policy, although well meant, led to bloated corporations, bloated
bureaucratic public service, subsidies, and low quality out put. The
preference given to nationals over foreigners as well as the protectionist
policies virtually killed all form of competition from abroad. The twenty or
so years of such a regime robbed many Zambians of a sharp competitive,
entrepreneurial spirit that resulted in a dependence syndrome on the state as
well as a failure to promptly adjust when the protectionist economic dam
wall crumbled in 1992. As an off shoot of the liberalization policy,
privatisation took root in the ensuing years, the fastest on record in the world
at the time and since. There fore we can say that FDI should be espoused
because the global trends dictate that and secondly, that is the only way
development is going to be fostered if and when the local capacities cannot
effectively and profitably exploit their resources. Globalisation entails the
integration and uniformity of global business transactions as a result of
reduced distances in the world due to advanced technologies, multinational
investments and the homogeneity of tastes propelled by the potent modern
machinery such as the electronic media. Thus, the world is viewed as one
village because what ever happens at one end of the village has a rippling
International Business Billy C Sichone 75
effect on the other end. Thus, globalisation transcends political, national or
country boundaries. What were stringent boundaries inhibiting international
trade have given way to a more harmonious world with similar tastes,
perceptions and desires. In addition to globalization, international trade
today defies political and cultural boundaries breeding a global cadre that
freely float around any part of the world. Thus, financier is at liberty to
invest their resources in any country of their choice where they perceive that
they will reap as much profit as possible. Thus, an investor will never put a
coin where their profit motive is either threatened or not maximized. If that
investment destination offers all the basic requisites attractive to the
investor, they swiftly set up camp and get busy siphoning as much as they
can. If they feel insecure and the threats out weigh investment gain, they
either delay investing or in worst case scenarios, pull out altogether. By that
token, the hosting country’s image hangs in the balance. Thus, we can see
that every country that hopes to woo, as many foreign investors must ensure
it makes their country as attractively competitive as they can relative to their
competitors. FDI is without doubt necessary and desirable.
What are the benefits of DFI to the country, individual and investor? This is
a broad and deep question but we shall answer it in general terms as relates
to the three entities mentioned above. The first benefit of FDI is that it
brings about development in a given locality. The much-needed massive
investment from abroad brings with it the necessary capacities that
accelerate development. Check any place where genuine investment has
taken root, what do you see? The place has changed record short time!
Imagine if that investment had not come, things would pretty much be the
same despite our boasting of having huge latent potential of untapped
resources. Apart from the financial muscle, DFI brings with it new
technologies, skills, competencies and in the process, these trickle down to
the natives, if they are wise to appropriate these and improve on them. That
is partly how the Japanese changed their fortunes from rags to riches in less
than fifty years.
Secondly, DFI brings about the transference of competencies and skills
cheaply as alluded to in the previous point. The locals imbibe new ways of
doing things more efficiently, cost effectively and profitably. Long after the
investors have left the country with their investment, these rubbed on skills
remain with the natives. In other words, they do not carry with them the
mental capacities that can be used to develop the individual and nation.
Thirdly, DFI brings about hard work. Where people were indifferent, laid
International Business Billy C Sichone 76
back and lazy, DFI compels them to work for their money and casts away
the laissez faire mentality. For far too long, the Zambian Government
literally spoon fed the citizens but the third republic suddenly removed that
golden spoon,and guess what, the children mourned! To date many are still
lamenting and are yet to recover. The sooner they get themselves together
and settle to some real hard work, the better. This resolve (to work hard) will
by and large terminate the much murmuring that characterizes many
Zambians against any foreign investor today. Compare Zambia with our
neighbour Tanzania, what a vast difference! I am sure Julius Nyerere
avoided spoon feeding, knowing its backlashes. The only way to take charge
of our destiny is hard work period! But fourthly, DFI changes the working
culture, mindsets and attitude towards life. Although closely connected to
the previous point, the point here is that the average lazy Zambian soon
realizes that they must work with their hands to generate wealth. They read
the times, yea, redeem the time and know how to or what to act on. The high
urbanization trend in Zambia would be reversed in record time as people
realize that the major factor of production, land is abundantly at their
disposal (assuming corruption and other vices do not interfere!). As I move
around Zambia, I often wonder why we rush to live in the city to be packed
like sardines when the large landscape goes begging from generation to
generation. When an investor buys large tracks of land for investment,
everyone is up in arms, what a paradox! Granted, the strategic eye sees the
future implications once our people realize. A land crisis might ensue in the
not too distant future. Another school of thought positively propagates that
as much land as possible be given out to people serious to productively
develop the land regardless of where they come from. This is a plausible
idea, provided the right safe guards are taken care of to avoid serious
blunders that Zambia has faced with respect to the mining and trading
companies thus far.
We have spent much time around this hill, let us consider the fifth benefit of
DFI and it is this: DFI contributes to Gross Domestic Product, GDP for
short. Among many things, GDP refers to the sum of all the transactions
relating to the income and expenditures of a country in a given time period
say one year. If the country received more income than it spent, then that
country is said to be developing or experiencing a growing economy. Any
positive GDP is desirable and indicates that the productive capacities are
being effectively and efficiently utilized to generate wealth. The goal is to
achieve as high GDP as possible, say 10-12% as China has been
experiencing lately. Other more mature and developed economies such as
International Business Billy C Sichone 77
the USA have a 4 to 5% GDP which is fine but not good enough for pauper
countries like Zambia. You will recall that as late as 2000, Zambia’s
economy was in negative growth but this turned around 2003 when the
Mwanawasa regime sacrificially applied the World Bank recommended
remedial measures. Where Kaunda reluctantly tread, Mwanawasa shut his
eyes and ‘heartlessly held the bull by the horns’, though only for a season.
Although politicians trumpet their achievements, the tangible results are yet
to be seen and felt by the common man on the ground. Be that as it may, DFI
is changing the tide. As we speak, inflation is down to around 8%
rates are down, the kwacha relatively stable (though sometimes suspected
politically manipulated e.g. before the 2006 elections, look at where it is
now, barely 5 months later!).
In the sixth place, DFI means more development, resources, higher standard
of living and an opportunity for Zambians to invest freely in their own
country and abroad. As foreign investors carry out their businesses, making
their work easier, some of them are cognizant of the social responsibility that
goes along with their resource exploitation. In other words, investors, in
addition to their marketing ploy, wish to thank the community in one way or
the other by paying back in kind or cash. That explains why some companies
like Celtel (now Zain) would go out of their way to promote the famous
“Star Search” because they are essentially saying, “Thank you Zambia for
what you have done by making us rich, we pay back some how by
promoting this contest”. Or take for example, KCM paying the national
soccer team coach. These are but examples. In the cases mentioned above,
the corporate image is built as well as lengthening the “acceptability of the
Seventhly, DFI frees the government from involving itself in business
thereby allowing it to focus on creating “an enabling environment” as
Chiluba often used to say years ago. In such a scenario, the government cuts
down on public expenditure as other players take over the running and
initiation of some activities such as building schools, private colleges,
stadiums, businesses etc. Thus, the government limits itself, and
conveniently so to a regulatory entity that facilitates a working framework in
which everything fits together like hand in glove.
As at Oct/Nov 2006
International Business Billy C Sichone 78
Eighthly, if prudently handled, DFI brings about job creation and economic
expansion. As more investors pour in resources into a country, different
industries, traditional and new, cause an expansion in the economy thereby
creating more jobs for the natives. This significantly contributes to the
reduction in unemployment levels.
Ninthly, DFI fosters better international relations between countries as the
political boundaries are bust and peoples interact, initially on business
premise but later on cordial friendly relations level.
Tenthly, the perceived job creation expands the tax base for the government
that in turn translates into better social amenities and services.
Eleventh, in a perfect world, DFI and privatisation allows more of the locals
to be serious stakeholders in many resources provided they have the money
as opposed to a command (e.g. socialist or communist etc) setting. In
addition, a free investment climate fosters entrepreneurial ship among the
natives, having opened their eyes to exploit the available resources and
markets at home and abroad. Twelfth and lastly for our purposes, DFI brings
about efficiency, raises competition thereby improving product and service
delivery quality. Thus, people have a wider choice, higher consumer power
and in time, make it cheaper to do business in that country.
That said, the glowing picture painted above seems to show a near
impeccable ideal world which presupposes that every factor will be in place,
static and maximize good for all concerned. For a moment, it looks like a
“win-win” scenario but sadly, DFI does have the down side as well,
especially if the playing field is not level. If one side is desperately poor
while the other is filthy rich, exploitation of man by man results. The
different development paces and levels between the nations also play a
major role as those from developed nations will have refined systems that
cheaply “grab” the raw materials from the less developed, process them and
return them to those countries at double or triple the value. Value added
goods are good but the inequalities rub off the benefits and it becomes a
unidirectional affair. It is like a “rat versus elephant” tag of war or a “speed
boat versus canoe” race. At times, the stakeholder /trading nations are
worlds apart. What are the real tangible negatives of DFI as experienced in
countries like Zambia? Many come to mind but a few will suffice and we
rest our case there after.
International Business Billy C Sichone 79
Firstly, the DFI advent often results in massive job cuts (or losses)
depending on what economic philosophy is being changed from. If, as was
the case for Zambia, the economy mutates from a command to a pure
capitalist economy, many uncompetitive entities either fold up or are
privatized. Thousands of perceived “excess staff” are shed off in a bid to
reorganize the entities into profitable ventures as dictated by the new
owners. Let it always be remembered that the profit motive is paramount in
the investors’ mind. That is what happened in Zambia after 1992 and
continues to. Watch the ZANACO saga repercussions begin to unfold. Job
losses are inevitable.
Secondly, the hard earned and developed companies are surrendered into
foreign hands that seem to “reap where they did not sow”. Many times, it
appears a rip off. Take the painful example of the ZANACO privatisation, a
profitable indigenous multinational company sold off by the stroke of the
pen! This transaction makes one feel hot under the collar. Consider the
ZCCM arrangement (although initially nationalized in 1981 from private
hands). The massive government investment, though not profitable at the
time, was sold off at ridiculous prices!
Thirdly, DFI withdraws services from places where the Government once
serviced. If a place or investment area is not profitable to the investor, they
swiftly close off their investment and relocate to a place where they think
they will benefit. For instance, many Banks closed their branches from the
rural areas and only concentrated in the profitable urban centres. The UBZ
serviced all the routes, no matter how bad but the modern investor shuns
these and cannot be compelled to go there. Though it is an opportunity, it is
not attractive enough.
Fourthly, DFI, if corruptly and hurriedly done, results in frustration, loss,
disillusionment, theft, and untold scandals. The nation (Zambia) is still
licking the MMD regime wounds after they recklessly privatized everything
without due regards to what their actions entailed. Very little or no safety
nets were provided for the redundant. For instance, people strongly think
that the Zambia Airways should not have folded its wings had reorganization
been allowed to take place. Corruption surrounds itself with clandestine
manoeuvres that only profits a small click of fellows, male or female. It is a
tragedy when unprincipled men and women are at the helm of such a
sensitive exercise. For some time now, Zambia has seriously lacked
politicians of valour laced with high integrity, strategic foresight, great
International Business Billy C Sichone 80
mental aptitude and disinterested professionalism. Unfortunately, they
(politicians) are in the driving seat not the citizens at large. Myriads of
Zambians will still bear the repercussions of some of those thoughtless
mistakes for generations to come. The new dealers are not any better,
especially after the ZANACO and mineral royalty scams. Corruption is now
more entrenched, complex, invisible but highly present, deep-rooted than
ever before. At face value, the corruption fight by the government of Zambia
seems to be but a smokescreen or at best, a political gimmick. In the mean
time, spurious transactions continue to take place in the back ground, leaving
no fingerprints or audit trail! In a nutshell, in many deeply corruption
infested countries, all the grand perceived benefits of DFI do more harm
than good because the rich and powerful grab almost everything to
themselves leaving the vulnerable poor (who are in the majority)
permanently wedded to poverty.
Fifthly, DFI sometimes robs people of their identity. Granted, we are in a
global world but the self-identity and esteem is lowered especially if the
nations’ population critical mass is illiterate as the case is in Zambia today.
Because people do not fully understand the issues, they feel robbed and
dribbled at the same time. A total dependence on DFI makes a statement to
the world that the locals have totally failed to manage their own resources
and are now mortgaging their country to others from abroad. This hits hard
on the people’s pride, esteem, aspirations and resolve to develop their lot. It
is painful to note how Zambia has thoughtlessly given away its sovereignty
at the mercy of DFI. People paid with their lives to redeem the country from
foreign control but today, barely 43 years down the line, we are crying for
the same exploiters to return and control factors of production and thereby
de facto rulers. That explains why KK and others constantly grieve when
present politicians sale the nation to get a kick back for them selves. This is
a bitter pill to swallow that no one wants to talk about.
But in the sixth place, DFI defies local rules and regulations once the
investors are entrenched and in control of all the key productive assets. The
powerful multinationals call the shots in many countries and get away with
many atrocities ranging from breach of labour laws, pollution, unfair
competition, clandestine dealings and out right disregard for the powers that
be. We see that in Zambia repeatedly, such as the BGRIMM explosion and
KCM pollution sagas of 2005 and 2006 respectively.
International Business Billy C Sichone 81
Seventhly, DFI does not really bring about home grown sustainable
development but rather what is visible are but crumbs falling from the
masters’ table. If those are but tips in the iceberg, then what about the huge
hidden mass from public view, under the water? Presently, an investor can
bring in and take out 100% of their investment. Further, it appears that when
they invest say $ 100,000, they reap a million times more and quickly siphon
it away to their off shore accounts or develop their home countries (which is
reasonable any way!). Once they donate a paltry $ 100,000 as social
responsibility, every body goes into a celebration frenzy, but what is $
100,000 compared to a billion dollars they have remitted abroad? What is
250 housing units built compared to $ 1 million equivalent of cash siphoned
Eighthly, in a bid to attract DFI, many countries steep so low as to literary
give away all their resources by offering unbelievable tax holidays and
concessions. These investors come and do business for the period that they
have a tax holiday and suddenly fold up when that ends. They vanish,
liquidate or return using another business name and again we give them
another 50 year tax holiday! This is not strange in Zambia, one wonders
whether the powers that be are involved in these scums!
Ninthly, DFI, leaves poor people poorer as the rich-poor gap widens. The
state is more interested in over taxing the already squeezed citizens while the
foreigners go scot-free for many years, yea, they go laughing all the way to
the bank. In a capitalist arrangement, the rich and famous are powerful often
having the law on their side. I am yet to see a poor person easily get solid
and expeditious justice in our land compared to the rich. “Money talks”, as
they say. Look at the KCM pollution saga of 2006, had it been a local
company which had polluted the Kafue river, all the government organs and
powers could have clamped down on them.
Tenthly, DFI, depending on government policy, often favours the foreigner
rather than the native. In a bid to attract investment, sometimes ridiculous
provisions in the law make one wish they were foreigners because then,
more attention and support is diligently offered by the government. If a
Zambian ventures to enter a similar business as the multinational, all the
laws seem against them and eventually choke them out of business. If that
does not, red tape does the trick. I often wonder how the government offered
large tracks of land to the Libyans while thousands are languishing across
the country for want of land.
International Business Billy C Sichone 82
Eleventh, if not well handled, DFI destroys the spirit of national hood,
aspirations and loyalty. People lose their unique identity and have no real
patriotic spirit to their country.
Twelfth, if the laws are bad, expect continued exploitation of man by man as
in the case of the privatisation laws of Zambia. They give the investor too
much bargaining and leverage power compared to the citizens. Unless and
until it is changed, DFI will continually appear a terrible monster.
Thirteen, Globalisation blizzards bring about fundamental changes on the
business scene. It some times kills local competition and reduces diversity in
other cases. An example will do. Remember the once famous Chilanga
cement brand? This brand made Zambians proud as it was used to build
many world class structures including the mighty Kariba dam wall. Well,
that brand in now gone. An international investor bought off the company
and changed the name to LarFarge from Chilanga in 2007. After hapless
attempts by some proud Zambians to preserve the name, they were overruled
by the powerful investors who care less about anything that militates against
their desires. That signalled the end of the powerful brand name but certainly
a gain for the foreign investor whose primary motive is profit.
Fourteenth, Investors take advantage of weak laws in a host country and
change their identity often as a tax avoidance trick. This has happened very
often though unnoticed in Zambia. People think it is mere “re-branding”
when actually it is a ploy to avoid or even evade tax. At other times, they
have feigned departure or change of management when actually the aim is to
evade some obligation to the state. In that way, the nation losses out one way
or the other as they claim to be new entities needing another five or ten year
Fifteenth and probably lastly for now, DFI promotes wanton exploitation of
natural resources. The Foreigners have a clear head start and advantage
compared to their counterparts. The archaic laws promote exotic investment
as it easily facilitates their paper work and builds their cartel network. Look
at the Lake Kariba arrangement, who exploits the Kapenta business the
most? Further than that, DFI promotes pollution too. The multinationals
sometimes flee their countries to invest at places where weaker pollution
laws exist. While the desperate poor countries rejoice that a Saviour has
come to town, in actual fact the enterprise could just be transferring the
International Business Billy C Sichone 83
pollution point and get away with it for many years hence. Once confronted,
they revert to the porous, ambiguous agreements or threaten to leave. At that
point, the pauper country’s hands are tied and thus stand aloof helpless but
painfully watching like a statue while exploitation continues. Cheap labour
is another area worth pursuing and looking at.
We have thus crystallized only twelve of the many evils connected to DFI,
we leave it to others to delve into other details but for now we run to a
It is now clear from the above point that DFI does have pros and cons which
every entity should carefully consider before any firm commitments can be
entered into. One would ask, do the benefits outweigh the demerits of DFI?
Not necessarily. Depending on the context and extant investment policies,
DFI can be a blessing or a curse. It is however advisable to avoid all
extremes which may lead to acrimony or capital flight. There is need to
move out of our time honoured enclaves and see what the global economy
offers. The five imperatives of economic development: Market led,
Knowledge based, Entrepreneurial, Regionally integrated and globally
connected need to be vigorously pursued. Needless Xenophobia
ought to be
exorcised. This author holds strong personal opinions about this matter but
he leaves it for you to make informed decisions. Further, he appeals to you
to read various literatures on this subject so that you comment intelligently
the next time the subject comes up in your discussions with colleagues.
Xenophobia= strong dislike of foreigners, intolerance, racism etc. This was clearly manifested in South
Africa in 2008.
International Business Billy C Sichone 84
CHAPTFR CHAPTFR CHAPTFR CHAPTFR 7 77 7
Types oI Wozkezs In InteznatIonaI busIness
In trhe previous chapter, we briefly defined and examined DFI, as relates to
International Business but we now proceed to say that there are three major
sources of multinational personnel. In relation to International Human
Resource Management (IHRM), we briefly discuss them in this chapter,
though a detailed treatment of this subject is in my other book, ‘The
In this global world, human resource can come from any place and perform
very well. Others plummet who have been star performers as home probably
due to contextual matters. Pay particular keen interest in the categories
1. Natives- There is an increase in the appreciation of employing natives
in certain sensitive positions because of the acumen of the people who
know all the inroads to success in that particular setting. It is also cheaper
to hire locals as opposed to expatriates, thus saving on the over-heads.
2. Expatriates-For a long time, this has been the practice of many a
Multi national organisation because of the feeling that “our own is
better”, knows the corporate goals, will be objective and socially
intelligent to read the times. The expatriate is expected to know the
critical aspects of the business and will thus more easily represent the
organisation. In a nutshell, the expatriate sent on an international
assignment for a number of years from the head office and will most
likely be a native of that country where the head quarters are placed. The
trend of hiring expatriates is steadily on the decline although still very
prevalent. With the advent of the virtual organisation, it would be
difficult to have expatriates in the sense we have described.
3. Third-country nationals- another option is to transfer some one from
one branch/division to another to head another place within the network.
That person is not usually from the head office nor is he/she a native of
the country of origin of the organisation but another third country e.g.
from India or Pakistan. This practice is on a lesser scale than the
expatriate option but equally works well.
International Business Billy C Sichone 85
4. Knowledge workers-This is the type of resource is on the rise rather
than the specifically stationed person. This type of worker is the sort that
has no fixed abode but is stationed at the Head office and travels around
the various subsidiaries around the globe using the specialized
knowledge he/she possesses. In the short run, this mode might seem too
costly and inconvenient but is cheaper in the long run depending on the
geographical location of the said person. The idea is to have a regional
facilitator whose overheads are apportioned among the various sub
stations. World Vision International has used this mode very
In a nutshell then, International business is complex and needs someone who
is well-adjusted, objective, wise and with the right acumen to fight the
battles that lie ahead.
Having brightly illustrated the International management aspects, we now
cruise to the next item where we encounter the pricing aspects of products
Even after producing the best quality goods, the manager must ensure that
the goods are successfully sold. Selling involves getting customers to buy
the products. As will be noted, customers are willing and ready to buy goods
that are fairly priced and equal to the satisfaction they derive. As such, if
there are too many middlemen in the process of distribution, chances are that
the prices will shoot up and thus reduce the sales. Therefore, in the present
chapter, an attempt is made to establish prices for an entire market, as
opposed to different prices that are pegged in different market segments.
Recall that products are produced with a particular market in view as well so
much that the price, in a way is determined by the goal. But recall also that
the Global Marketer has to have a uniform brand and uniform price if going
to market goods on a global scale. Should the prices vary, this could harm
the sales and the goodwill of the company. Thus before prices are fixed,
certain questions must be answered such as:
1. Is the price right and fair?
2. Does the price take into consideration factors such as inflation?
3. Is the price competitive and profitable enough?
4. Does the price match the bundle of utilities and satisfactions in
5. Will all people regardless of culture and location accept the
International Business Billy C Sichone 86
Modezn Tzade nethods:
If the above are adequately addressed, then the marketer can safely venture
on. However, there are situations in a country where foreign exchange is
hard to get due to restrictions or the Dollar is simply scarce. In such
circumstances, (and where allowable) the barter system can be used. In
general, counter trade is an option, which is defined as the ‘arrangement
under which the sale of goods or services from one country to another are
linked to sales in the opposite direction. Counter trade arrangements
frequently characterize East-West trade.’
There are at least 4 types of
1. Barter- where there is an exchange of goods for goods.
2. Compensation- This involves the payment of a mixture of goods and
3. Counter purchase- Where a contract is signed to the effect that the seller
agrees to sell a product at a set price and receives payment in cash and
4. Buy-back-‘This agreement is made when the sale involves goods or
services that produce other goods and service, that is, production plant,
production equipment, or technology.’
ƒ ƒƒ ƒ
Companies must also take into account other avenues such as transfer
pricing, intensity of competition, the commercial as well as political risks
and also the hedging options that are available. Hedging has to do with
shifting the risk to a third party. These gadgets should inoculate the
international marketer from the price escalations that occur as a result. This
price escalation can be further minimized in three ways:
Lower the cost of goods- Build quality in the production process to avoid re
working as well as adopt the best practice methods.
Lower the tariffs- The Government should reduce or remove tariffs.
Lower the distribution costs-Reduce on the number of middlemen such as
agents and merchants.
There are many other factors to be considered but suffice it to say that the
above are the most critical and ought never to be ignored. Finally, we are
about to enter the final lap of our book review of this excellent book. Thus
far, it has been an exhilarating journey, how we long to go further!
The Language of Trade: A glossary of international trade terms, Page 48.
International Marketing, Philip Cateora, page 575.
International Business Billy C Sichone 87
We wrap up with a consideration of the capital needs that will confront the
prospecting multinational company. As usual, a number of variables will
come into play. Firstly, the company must assess its ability to generate funds
from within and then outside the firm. A critical internal scan is crucial to
determine whether the local resources are enough, appropriate and cheaper.
Generally, this is the case in the event where this where this situation fails,
the option available is to approach financial bodies such as the Export and
Import bank (EXIM) for cash. This body is set up by the government to
facilitate and promote trade within for local companies. The said body also
issues loans and guarantee to potential creditors so that international trade
may be enhanced. In other words, the EXIM supports among other major
things, capital investments, guarantees risk, and supports American
companies to go international.
As intimated, the EXIM Bank is American but has tentacles in other parts of
the World as well, working on the same principles. But what are the ways in
which finance can be gotten? What arrangements avail themselves? For an
international transaction to take place, a number of sureties are needed and a
number of ways have been devised such as the following five basic payment
1. Letters of credit-This is a letter opened in favour of the seller by the
buyer. The said letter shifts the buyer’s credit risk to the bank so that in
the event of failing to pay, the bank takes up the responsibility.
2. Bills of exchange-This is a time draft where one promises to pay at a
future date whilst taking possession of the goods now. In other words, the
bank issues that bill but will only make actual payment when the agreed
date arrives. In that case, the seller pays a small charge if he/she cashes
the bill before the agreed date. In this case, the seller assumes all risk
until the actual dollars are received.
3. Cash in advance- in this scenario, the seller demands that cash be paid in
advance before shipment of goods can commence.
4. Open accounts-Sales take place but only with long standing trading
partners whose credibility is worth resting on. In this case, the seller is in
a position trusting that the other parties will automatically honour their
5. Forfaiting- this is a one time arrangement with the bank by the seller to
buy a specific accounts receivable. Usually an institution will act as the
forfeiting party, assuming all political risks as well. In other words,
“Forfaiting is a long term financing technique which is available for the
seller to make a one time arrangement with a Bank or other financial
International Business Billy C Sichone 88
institution to take over responsibility for collecting the account
receivable’. The exporter offers a long financing term to its buyer, but
intends to sell this account receivable, at a discount for immediate cash.
The forfaiter buys the debt, typically a promissory not or bill of
exchange, on a none recourse basis. Once the exporter sells the paper, the
forfaiter assumes the risk of collecting the importer’s payment.
A number of financial institutions other than the EXIM bank are available in
the USA. Two of them are the Agency for International Development (AID)
and the Overseas private investment corporation (OPIC). Happily, we have
safely manoeuvred our ship among the rocks without running aground; we
now hurtle along to the close of the work!
InteznatIonaI busIness-pzesent and Iutuze
From what has been highlighted so far, we have no telling where the IB lot
may fall tomorrow but we can safely assert that IB will become more
complex and yet user friendly as long as the present trends continue. The
present indications seem to suggest that IT will continue to impact the
traditional trends for a long time to come. It is possible that e-commerce will
be the main avenue for IB as it is faster and far much cheaper in the long
run. Today, an order can be placed from one end of the terrestrial ball and at
the click of the finger on the key board, an order is made triggering an online
just in time process at the other end of the globe. This means that companies
will be more agile, leaner and smaller, offices paperless, brand names
proliferated, outsourcing commonplace and product quality higher.
Decision-making will be faster due to the availability of strategic
Much, much more remains veiled to the human eye at this stage but suffice it
to say that IB will be catapulted into more dynamic arenas. Let the reader
keep a keen meticulous eagle’s eye to what lies in store.
International Business Billy C Sichone 89
“7he /ormer metroµoIìtan countrìes are IargeIv resµonsìbIe
/or the extreme µovertv o/ the A/rìcan countrìes, /or theìr
chronìc backwardness and theìr socìaI and economìc µIìght.
7hrough the mechanìaatìon o/ trans/er µrìces and monetarv
machìnatìons 7he ìnternatìonaI monoµoIìes are takìng out o/
the deveIoµìng countrìes astronomìcaI sums /ar exceedìng
the vaIue o/ aII the o//ìcìaI aìd those countrìes receìve /rom
ìndustrìaIìaed countrìes.' VaIentin 8hchetin D. 8c, 1983
CHAPTFR CHAPTFR CHAPTFR CHAPTFR 8 88 8
Thus far we have sought to describe what ‘International Business’ is but our
question has hardly been tackled, has globalization really left Africa on the
margins? Is Africa thrown to the fringes of civilization and relegated to the
pauper’s den forever?
In attempting to answer this million-dollar question, we purpose to divide
our discussion into a number of sections akin to the first part. We shall
commence by stating two radically opposing views and then proceed to
prove our case.
The two major views are that globalization is further weakening African
position in many respects while the other holds that Africa itself stands
responsible for this apparent marginalisation.
The first view, tenaciously held by people like Dr Kaunda and Dame Judith
Hart asserts that Africa has been wrecked:
1. Economically-The first world Countries have built a curtail
calculated to cripple Africa. This has systematically been done
economically by attaching egocentric conditions to aid. This aid,
although appearing in good faith is actually deadly bait once
taken hooks the throat forever. As we write, Africa is like a
caricature that moves at the bidding of the manipulator. The
economies have shrunk with no hope of recovery.
International Business Billy C Sichone 90
2. in its Sovereignty-As a result of being a puppet, the Africans
have more than one loyalty and have lost all bargaining power.
The African voice is fragmented and enshrouded in debt. Once
one of those donors decree, the African have little or no option
but to obey
. One of the Zambian Parliamentarians has spoken
prophetically when he asserted that the colonialists would take
over Africa again. In a sense they have already as the economic
landmines detonate randomly.
3. in its bargaining power-This is connected to sovereignty above
but thrust here is on the ability to negotiate or suggest ways that
might be suitable for the country. The fact that the Structural
Adjustment program succeeded in Ghana for instance is no
guarantee that this selfsame plan will work elsewhere. But being
beggars, the African’s voice cannot be heard.
4. …and has weak infrastructure i.e. IT etc. This is the major basic
component that is missing in Africa. The Countries are so
dilapidated and do not have the basic infrastructure to facilitate
development. The Africans are too poor to finance and develop
these much-needed structures. The advent of Information
Technology for example is critical if Africa is to develop. The
continent ignores IT at its own peril but sadly, the capital over
heads to set up such structures is simply not there. The bulk of
the generated cash goes to the never-ending debt servicing.
5. The loss of independence and objectivity of the World Bodies
like the United Nations. The UN is perceived as a US baby with
only milk teeth. The attached Boutros Ghali Case shows to what
extent the UN has been “Americanised”. In every sense, today,
the UN is synonymous to the USA. One does not need to be a
genius to see that the UN is selective in its care and concern for
the nations. If the USA has an interest in that particular country,
then speedy attention will be given to that particular nation but
other wise nothing will happen. Recollect the Rwanda and
Bosnia cases, which war received better attention and coverage?
Today, there is conflict generated by poverty and thus no peace.
Look at the case of Zambia for instance, the nation has never
been to war yet it is classified with the countries whose
economies have been ravaged as a result of war. Conflict
resolution and prevention appears to be the private preserve of a
Refer to Taylor’s book “Development from within” pp 219
International Business Billy C Sichone 91
few and directed to the richer nations or where the USA has
interests, as earlier intimated.
6. By the crippling debts and the unwillingness of the developed
countries to write off the same. The debt hardly needs elaborating
over but the African continent is entangled by the crippling
complex web of debt and cannot possibly make headway. Try as
it might, it is incapable as long as this burden remains fastened to
7. By the unfavorable dictates of from global bodies like the IMF
and the World Bank
. Recently, poor Zambia has been trying to
defy the IMF imposed rules and regulations. Such retorts cannot
possibly move the cold-blooded capitalists but still demand their
cash. In a sense they have a right to their cash but to decree and
coerce Governments into terrible policies is not helpful. Sadly,
The Africans have to bow to pressure in the fullness of time.
The above have effectively contributed to Africa’s marginalisation. A
careful analysis of the factors above clearly shows that Africa has been
paralysed and condemned to the economic bone yard.
The other school of thought, advanced by people like Dr Mark Ellyne holds
that Africans cannot claim to be disadvantaged because:
1. Africans themselves are the problem. Generally, they
themselves are to blame because they do not work hard
but love ease. They would like to live like kings minus
working like slaves for themselves and theirs. The
developed world film star mentality has captivated many
like a virus. Further more, the Africans are indifferent
and not proud of where they hail from. Given an
opportunity, they would prefer talking about the United
States, Japan or Europe rather than promote their own
roots. Talking about Africa in a developed world context
is like throwing a wet blanket on the discussants. As one
e-mail attachment has quaintly put it “Only in Africa”.
The lay out in that document depicts the stark difference
between Africa and the Western World.
Research reveals that the IMF and World Bank are excellent and well meaning bodies but in practice,
their policies are awful. Refer to the UN hand book and the booklet on the IMF, its structure and purpose.
Reading through the literature makes one feel that some criticism on the institutions is really not fair and
International Business Billy C Sichone 92
The average African will just laugh off the differences
instead of being challenged to do something to improve their
lot. By and large, as shall be seen, the Africans themselves
have wrecked their economies and remain ironically
indifferent about critical issues. For instance, the ravaging
effects of the AIDS pandemic ought not to be if
Governments and people themselves were more serious than
they have hither to been. Denial is no solution to problems.
2. It is more of attitude problem than anything. Closely
connected to the point above, indifference and lack of
will power has crippled the Africans. The laissez faire
attitude towards work, relations, social issues and plans
are in the main extremely bad. The dependence syndrome
seems very deep-rooted and will take a long time to
change people’s perceptions. To disinfect such polluted
minds will take more than just better perks but a radical
paradigm mindset shift. For instance, set appointments to
a typical African are not big issues when they abscond or
arrive late, after all, they never used watches from the
womb but by instinct used the sun to tell their time! An
African can watch a problem develop from bad to worse
and still remain sited on his/her frail laurels! Many
economic indicators have been seen afar off but
procrastination and lack of patriotism is what has cost the
continent millions of dollars. I once heard of a person
that saw a growth appear on their body and did not bother
going to hospital despite clear signs and warnings that it
was a cancerous growth. Until the same spread across the
body and that person was bedridden did they think of
actually going for a check up. It was too late. Attitude,
attitude, attitude is all that it takes to develop.
3. Reluctance to change with the times e.g. privatization.
Africans by nature are generally reluctant to change with
the seasons and to keep in step with the times. As a
matter of fact, the average African is very suspicious and
lazy to apply themselves to new things unless that issue
immediately threatens their very lives. Take for instance
the advent of IT, many African nations, until recently
were very casual about this matter. Mean while, the
world moved on and now, when Africa is years behind,
International Business Billy C Sichone 93
they wake up to blame the west! In addition, the corrupt
leaders have their own personal agendas to fulfil and will
fight or block any new innovation that will threaten to
derail their plans. For instance, it is believed that in
Zambia, there has been a curtail, though undocumented,
over the cell phone business. It is believed that the rates
charged in Zambia are among the highest in the region
but when another firm, Vodacom decided to invest at a
far much cheaper rate, they were blocked! Why? The
grape vine has it that the “big fish” in the Government
are share holders in the present curtail and fear losing
their income should Vodacom come in. Having made
enough cash, news reaching our desk is that Vodacom
can now come if it wills, having tangented to
Mozambique recently. That is a one off case that
involves corruption and abuse of office but the systems
and ways of doing things are also archaic. For instance,
most of the Government buildings in Africa are the
slowest in data processing, manual systems and obsolete
work structures that stifle innovation or initiative.
4. Rampant institutionalized corruption and theft. This is
the characteristic black mark of the African government.
Corruption is a way of life as blood is to the body. If one
has to get things done, they have to “oil the fingers” of
some one. This vice is so rife that the State police are
viewed as the most corrupt on this terrestrial ball. Until
recently for example, when the Police officers wanted to
fund raise for personal use, they would stage a roadblock
at any and every turn. You could be assured that of the
thousands netted for “offences”, only a handful would
actually reach the police station and pay the state, the rest
would oil their way out of trouble. In Zambia, the word
“Nchekelako” has become a household name. This
Nchekelako business has spread all over the systems
beginning from the Plot one right down to the common
man on the street. The second republican President of
Zambia made corruption so entrenched to the extent that
he himself was the very epitome of corruption. Indeed, he
is rightly called the “political engineer” who dribbles
every one including himself! He is a Doctor of corruption
International Business Billy C Sichone 94
of the highest degree. But the said Doctor is only but a tip
in the iceberg of the corrupt leadership Africa habours.
Kenya, for example, with a much stronger economy has
not been spared from the Moi led corrupt legacy built and
refined over 23 years or so. Thankfully, the new Kenyan
President (Kibaki) did not get there through a corrupt
electoral process unlike in some countries, though his
second term election was highly controversial (2008).
That not withstanding, the new Kenyan leader still has
the mammoth task of undoing all the mess and creating a
new approach altogether. That undoing aspect will slow
down development somewhat. In Africa, a minister has
the audacity of awarding himself huge multimillion
dollar contracts to carry out works and no one talks about
it. Systems corruption sticks like algae on the wall in
Africa. Closely connected to corruption is a rampant
unchecked level of theft either within the system or just
simply pilfering, and no one bothers to follow up. The
recently liberalized press pursues a story for a season and
abandons it altogether. Thus, the educated thieves escape
unscathed. Ironically, thieves in Africa are viewed as
heroes! Indeed white-collar crime and other wise are here
to stay for a long time. Now, how on earth does a country
expect to develop when entangled in such a negative
5. No accountability or transparency. The African person
generally takes offence to be asked to account how they
have spent their money or used assets. This suggestion
borders on lack of respect and mistrust for the person.
And yet much dirt goes under the carpet in that way
unchecked. Accountability to the people or to have ones’
records straight is one of the sure ways to development
without which, Africa will forever remain on the
apparent fringes of globalisation. Corruption thrives in
the dump gloomy clandestine environment where the
rules are not to enquire into issues too much or else…
6. No plans and goals. The attitude problem permeates to all
levels and results in a blurred vision or simply the lack of
it. Many leaders and private citizens have no plans,
strategies or goals to improve their lot but look out for
International Business Billy C Sichone 95
free hand outs from the west. This has to do much with
the spirit of the nation as led by the leaders. What has
made Japan what it is today? It is determination, hard
work and the will to improve. They have followed a plan
all along that has been a guiding principle all the while.
For instance, Zambia has had no clear plan in the last 11
years and has been free for all regardless. What Africa
needs are leaders not bosses whose major agenda in
public office is to alleviate poverty on the masses rather
than create a conducive atmosphere for themselves only
to thrive thereby weakening the economy further.
7. Not cost consciousness. This comes out in many ways
such as the desire to live a luxurious and flamboyant life
style that is way above the means. Unfortunately, the
problem starts with the top government officials and
trickles down through the system to as many as have
access to resources. It is amazing how the poorest
countries in African have the most luxurious cars,
mansions, cell phones and the endless planning
workshops that do not seem to lead to implementation. In
all these areas, allowances are an extra income generating
activity (IGA). For instance, it has been said that
Zambian Ministers have a minimum of two Porsche
vehicles and cell phones that they use at will with no
regulations. Millions of kwachas are thus wasted in
useless trips and phone calls probably to girlfriends. In
some cases, the Ministers’ children recklessly drive state
property, crash them and escape unscathed. This is the
African way generally.
8. Weird policies adopted by governments. Some
governments choose policies that go against the grain of
modern development all for the sake of gaining political
mileage. Some of these policies are so unwise that they
actually cut off the material countries from globalisation.
A case in point is what has happened in Zimbabwe.
Although in principle, the land sharing issue is correct,
the manner in which it has been done is wrong and
militates against the current trends to globalisation. The
once strong economy of Zimbabwe is slowly
disintegrating to tatters as time goes by due to the idle
International Business Billy C Sichone 96
economy. By that token, IB activities in Zimbabwe have
slowed down and thus causing the economy to contract.
The Politician does not care about all the consequences
as long as they can hang on to power, peradventure die
while still in office. The African leader is keener to keep
the Presidential office vow than the marriage vows! And
now they are talking about third terms and all the
9. Misplaced priorities. This point is seen everywhere by
the way money is spent and on what. Many African
States are prone to crisis management and would not
think strategically in the long run. For instance, They
spend over K 14 billion (About $ 311 million) on
Parliamentarians’ luxury cars and leave thousands to
languish in the streets for want of food! Why allow the
hospitals run months on end without essential drugs
while the president galavants aimlessly all over the
World? Globetrotting will not feed people. As though
that were not bad enough, the countries over spend by
billions of kwacha just to protect a puny mere mortal!
What is the justification of having a motorcade a
kilometre long and all economic comes to a stand still
when one fellow is passing through town? For all we
know, before one of those aimless globetrotting errands
takes place, an advance party goes ahead using
10. Religion and culture. The other aspect that cripples is
Africa allowing itself to be a play ground for
fundamentalism of all sorts that leads to a stand still. If
two opposing religions dominate, rivalry results where
there are constant frictions leading to wars. Apart from
the strong religious problems, there are values and
cultures that are at variance with the modern trends of
business and these need changing over time via frequent
vigorous campaigns. The ethical problem that confronts
the campaigner is whether that activity is in keeping with
the religious and cultural norms or else risk losing his/her
head! To some extent also, religious fanaticism is not
realistic and will not bother itself to ensure that bench
International Business Billy C Sichone 97
marks are achieved as the means of verification and
measurement are extremely blurred, if not nonexistent.
11. Lack of will power- The Africans spend all their life
times complaining rather than setting goals for
themselves and endeavouring to achieve them. For
Instance, they should have the will power to succeed in
all areas such as agriculture, Engineering and business.
They should will to succeed like any other. The saying,
“Where there is a will, there is a way” sound so true!
12. No determination and patriotism-Many are slothful and
die while entertaining wishes. Were we to sample up
many brains in the grave yards, many would have grand
plans but no determination to implement. The vast
majority of Africans apply them selves in other
developed countries but will never do the same at home.
In fact, they disgust the thought of coming back to
Africa! But look at an average Dutch person, how so
devoted they are to their country! How so patriotic! How
so determined even to reclaim land from the sea! How so
proud of their country! Look at the Japanese, how so
determined to rebuild their country from the atomic ashes
of 1945! Africa suffers from a strategic and visionary
leadership crisis that trickles down to the average person
on the streets. Gone are the days when our national
leaders were our heroes and mentors… For instance, I am
yet to hear a child who would say, “When I grow up, I
want to be like Dr X, the former President of Zambia”
Those days have receded into the irretrievable past.
13. Weak and shrinking/contracting economies. This is the
bottom line why Africa as a whole is seemingly
marginalized. A quick scan will reveal that nothing much
is happening on the continent that would capture the
World’s attention. Remember that the World is very fast
and will only be captivated if something is really worth
pausing a while otherwise, the issue will be ignored. By
that token, if no interest is shown, the international
business prospects are reduced. In African, usually the
economy depends on one major issue as the main stay of
the economy and once that is removed, the country
simply nose dives. Zambia, for instance depends on
International Business Billy C Sichone 98
Copper as the main international trade commodity but
once the prices plummet, the country’s economy is
impacted badly. But in a strong economy, one sector
alone should not dictate the economic climate but many .
If the mining sector fails, the service industry should
compensate and absorb the negative shocks resulting
from another sector. Further more, a well-developed
industrial base is critical or else the Gross domestic
product will not improve. In Africa, what has been
happening by and large is that the economies have either
been static or shrinking. The picture is different for well
built symmetrical economies.
14. High unemployment due to rapid privatization. This
trend, though good in itself once carelessly handled has
left scores of people jobless and on the street. Having
worked all ones’ life and then suddenly hounded out has
led many to an early grave. The problem is that the
agencies appointed to supervise the privatization process
are not independent and are equally interested parties.
For instance, Zambia has on record, the most rapid
but this was done hurriedly without
due regard to the repercussions and no safety net to
cushion the impact on the people and economy. Further
more, the greedy politician would not for a moment let
the agencies operate professionally but would interfere at
will. When we scan where the proceeds from the
privatization process in Zambia went, we cannot trace it!
Where is the money? Who took it away? When the trail
is followed meticulously, it will not shock us to discover
that millions of cash stashed away in private individuals’
accounts. As a result of the rapid privatization rate,
thousands are unemployed while those churned out of
school have no hope of being absorbed by the industry.
The shrank economy cannot take in more people no
create conditions for more employment much like how a
person feels when they are in the process of vomiting. If
the African leaders had followed the prescription laid
down carefully and with the safety guards, most of the
Refer to attachment on this in appendix C downloaded from the internet in November 2007
International Business Billy C Sichone 99
mess evidenced today would have been averted. Further
more, if corruption had been kept at bay, better results
would have been seen. In a sense, it is impossible to carry
out the twin process of privatization and reengineering
without having some casualties in terms job losses but if
properly done, the economy would absorb them by either
creating more formal jobs or encouraging
entrepreneurship. Look at Ghana for instance, the
structural adjustment program is a success story because
certain issues were taken heed to.
15. Poor quality standards- Resulting from the weak
economies and the inability to invest in research
development, the African countries usually produce
substandard mediocre goods and services. These do not
meet the high ISO standards and thus cannot be relied on.
If this trend were to alter radically, much like what Japan
did, the face of Africa would change. It would now
probably be called the “Shining continent” because it will
not be possible to ignore it.
16. Core competencies ignored- Half the time, African
countries imitate the West and do not carry out a Self
SWOT analysis to determine what the major strength
could be of the country. Want of this crucial exercise has
resulted in spreading resources thinly all over the place
and there by having a zero if not negative net effect on
the economy. If the strength lies in the Mining sector, the
by all means strengthen that area. If it be in the Service
industry, then throw in your lot in that area, while of
course building other core competencies. The problem
how ever has been that people want to advance their own
ends at the cost of national development.
17. Diversion of funds. The African governments are good
at diversion of funds and window dressing without
leaving any fingerprints, yet the cash has been
rechannelled to fund a senseless Presidential trip for
example or some uncalled for workshop. The diversion
of funds in the end hampers development, thus, donors
are now prefer to deal with NGOs rather than with the
International Business Billy C Sichone 100
18. Africa did not start industrialization fast enough and has
shown little or no pulse in that area
. The blamed western
World started hundreds of years ago and have frantically
been perfecting their skills. The famed Japan for
instance, started its industrialization as early as the
1820’s and when the Atomic bombs flattened two cities,
lives were lost but not the knowledge. Hence they were
able to recover, catch the ropes of the quality movement
advocated by the great Deming, and then develop their
own indigenous technologies uniquely theirs that the
world has bought in. Recollect that Japan went through
three phases of development: the Agriculture, the light
industry, the heavy and the Technology phases. Further,
it has diversified its economy galore giving a firm
economic base. Now Africa has hardly gone through any
of those phases with the exception of a few.
19. Drought, famine and other natural disaster making it
practically impossible to neither predict nor manage.
Africa has suffered s many natural disasters.
20. Autocratic leadership styles. Despite their high learning,
many African leaders are still haunted by the autocratic,
royal and totalitarian kind of rule that was accorded to
the Kings of the past. Once one is propelled to the
highest office in the land, they want to assert themselves,
and settle old scores using state machinery and
taxpayer’s money instead of focusing on developmental
issues. This kind of leadership is detrimental and
antagonistic to innovation, enterprise or initiative. This
terrible attitude was depicted in Zambia recently when
one of the chiefs asserted that a President could not be
charged with theft “since he only makes small mistakes
and these are allowable…”
A summary statement of the above would be as Brett has
asserted that “the State structures ìn the 7hìrd WorId are
wìdeIv regarded as rìgìd, ìne//ìcìent, oversta//ed, and
corruµt- svstematìcaIIv exµIoìtìng theìr µrìvìIeged
A development MA Japanese colleague, Masaki Miyoshi, holds this view. When analytically thought
through, Masaki is right.
International Business Billy C Sichone 101
status to µrovìde mìnìmaI servìces to the µubIìc and
extract monoµoIv rents /rom theìr cIìents, whìIe
conductìng theìr busìness ìn secret to de/end theìr
actìvìtìes /rom µubIìc scrutìnv and controI. So extreme
ìs the condemnatìon that /undamentaI restructurìng ìs
usuaIIv µart o/ the adjustment µrogrammes ìntroduced
bv the IMF or WorId Bank where the remedv ìs o/ten
not just re/orm o/ exìstìng structures but µrìvatìaatìon
and en/orcement o/ controI bv °market /orces".”
thinks the Post colonial African Governments have gone too
Brett as quoted by Taylor and Mackenzie in “Development from within” pp 218 1992 edition.
International Business Billy C Sichone 102
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But is Africa really left on the margins by globalisation?
This million dollar question raised hardly needs any further
argument as the stark reality on the wall is as clear as the noon
day sun. If we trace the roots of development through the
corridors of the centuries, Africa has always been marginalized
and neglected at all forums.
It is only viewed as a raw material
source and no further. Reading the journals of the ancient
explorers and sea farers, one cannot fail to pick that their main
aim for venturing beyond the borders of their countries was to
generate wealth and then bring it back to their countries. There
are few exceptions to the rule though. Recollect that Africa was
once known as the “dark continent” and people flocked to find
out what was inside it leading to extensive plunder that has left
the continent reeking with abject poverty. As though that were
not bad enough, the explorers opened the door for the colonialist
Governments that flocked to ransack the land. Vast stretches of
land with trees were felled or cleared for timber and
development. Apart from that, the natives were caged and sold
as slaves while others were used as cheap labour to till the land.
Thinking about the great Cecil Rhodes with his British South
Africa Company (BSA), it is difficult to imagine that his grand
dream to build a railway from Cape to Cairo was planned in
good faith, or whether it was with egocentric motives at heart.
That not with standing, the interior of Africa was explored and
opened up for what it really is while, truckloads of precious
minerals and raw materials were siphoned out to develop the
now prosperous first world countries. As long as there was room
for wanton plunder, this scourge continued. When the
Refer to the Preface addressed to the reader in the booklet “A NEW INTERNATIONAL ECONOMIC
ORDER” by Valentin Shcetinin et al pp5
International Business Billy C Sichone 103
Liberation winds begun to blow across the continent, the
Colonialist begun to with draw while leaving economic
landmines so that the newly independent states remained
dependant on them. That withdrawal was not with a little
struggle, hardly thinking about the welfare of the remnants. As
swiftly as they came in, so they left.
Now, the African continent is by and large independent but a
new form of colonialism has arisen, from those detonating
landmines of yester years. Imperialism and the crippling debts
now clutch the nations in the developed World’s grip. To day,
Africa is called “the forgotten continent”. That assertion is not
far from the truth because most of the World events and
businesses revolve away from the continent as though there was
nothing to talk about regarding Africa, nor due consideration is
given to the Continent. At this rate, nobody is interested in
Africa any more, for it is perceived a land of excruciating
poverty and pain. The best that the first world does is to pull a
few destabilizing strings when an African nation or a group of
them begins to make strides to economic recovery. Now that
affluent have gotten what they want, they have abandoned
Africa and do not want to have anything with it. Ironically, even
the United Nations is not really interested in African affairs
despite having an African at the helm. Kofi Annan is but a
smart American puppet that has no teeth to bite, so it is
perceived. Boutros Ghali of Egypt was different, no wonder he
was hounded out of the 38
floor of the UN building at the end
. For instance, if there is a war in Africa, the a UN
stands by the ring side and watches as people haplessly hack
each other to death but notice when another country probably in
Europe erupts in war, the whole world is kept on its toes until
the issue is resolved. The African turf and people are used as
scientific experimental guinea pigs to test the latest arsenals to
see how lethal the same could be. One would not be far from the
Check write up in appendix C for a full write up on Ghali’s ordeal with the Americans.
International Business Billy C Sichone 104
truth to believe that the richer nations in some instances actually
deliberately trigger wars so that the demand for their products
could grow by that same token. To some extent, the richer
nations are content to maintain a total control on the African
continent in some way, no matter how remotely so that they can
keep them under subjection.
If Africa is really marginalized as suggested above, why is that
the case? Varying views have been advanced but supposing that
were the case, the question that begs answering squarely in the
face is why the marginalisation? Popular opinion among lay
people is that the richer states still depend on the under
developed nations for raw materials and also for cheap labour.
The following are the reasons why Africa is marginalized:
1. The continent is a potential economic power due to the
huge untapped mineral and cheap human resource.
2. Potential significant market. Recall that Africa has a
potential market of over 480 million people.
3. The desire to control and dominate others, as evidenced
by the USA over Iraq, Iran and North Korea (November
and December 2002).
4. The devastated weak economies that cannot compete
favourably on the international markets.
5. Regional groupings- these have effectively blocked any
form of market penetration to the place where the goods
would fetch a good price. Thus, the goods are either
more expensive to produce or have no market leading to
6. Un realistic standards that block Africa. The developed
world, although working at a different wavelength, has
deliberately set up standards far out of the poor African
nations’ grasp. Minute things disqualify African goods
from penetrating the richer and affluent markets but the
reverse is true when things are being sent to Africa from
the developed world. The only way to get over this
International Business Billy C Sichone 105
hurdle is to scale up on quality and specification, of
course at the bidding of powers that be.
7. Many of the countries in Africa do not have a productive
base upon which to lean. Most of them are slowly
becoming consumer destinations where relatively
cheaper goods are dumped. With such a scenario, a
nation courts danger if it closes off the outside world or
International Business Billy C Sichone 106
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ß ßß ßut how is the above scheme been concocted? The basic
formula to systematically cripple Africa from the fast
developing World market is by insisting that the debt burden
remains un removed so that the countries in question are for
ever using every dollar to service the selfsame debt. The other
way is to make the Nations dependant by either not helping
them in times of crisis until they are reduced to their knees there
by developing a dependence syndrome that sticks like algae to
the victim countries. Further, the powerful nations impose harsh
unproductive economic survival plans that are deliberately
tailored to create more dependence or simply not ideal with the
actual problem that faces the continent. Half the time, the
prescriptions are suspect as they only result in untold suffering.
Further still, the stronger economies, in extreme cases move in
to topple governments they perceive to be standing in their way.
The zeal with which the USA wants to over throw Saddam
Hussein in the name of terrorism and weapons inspection is a
case in point. I suspect their interests are the oil fields, which
Saddam has on his turf. In these days of geographical
information systems (GIS), remote sensing techniques are used
for mineral prospecting*. As such, the richer nations prospect
from space and then move into a given area, buy off the land
and initially clandestinely begin to tap the minerals. By the time
the landowners discover, it is too late, people displaced and firm
land tenure contracts in favour of the plunderers (or investors)
have taken root. In times when these people get what they want,
they suddenly drop everything and leave the place even worse
than before. A case in point is the Anglo American saga that
occurred in Zambia in 2002.Another example is the panic that
surrounded Dr Mwanwasa’s fake death announcement in June
2008. Many of the investors nearly took off leaving Zambia
empty handed! Copper, the main stay of the Zambian economy,
International Business Billy C Sichone 107
has lately fetched very little per metric ton (2002) and yet it
remains the backbone of the economy without which the
economy crumbles badly. The recent high base metal prices
have only benefited the investor more than the indigenous
Zambian. Such circumstances are fertile grounds for economic
blackmail but unfortunately, many pauper nations oblige. Some
vital statistics and information will be handy at this stage to
strengthen the assertion that Africa has indeed been outwitted in
some subtle way. The Valentin Shchetinin led team rightly
asserted in the book “A new international Economic order: its
advocates and opponents” that “the former metropoIitan
countriea are IargeIy reaponaibIe /or the extreme
µovertv o/ the A/rìcan countrìes, /or theìr chronìc
backwardness and theìr socìaI and economìc µIìght.
7hrough the mechanìaatìon o/ trans/er µrìces and
monetarv machìnatìons 7he ìnternatìonaI monoµoIìes are
takìng out o/ the deveIoµìng co astronomìcaI sums /ar
exceedìng the vaIue o/ aII the o//ìcìaI aìd those countrìes
receìve /rom ìndustrìaIìaed countrìes..”(pp65).
The following statistics are even more startling: “I/ we Iook at the
µresent economìc sìtuatìon ìn A/rìca, we cannot heIµ
seeìng the obvìous dìsµarìtv between the contìnent's
coIossaI µotentìaIìtìes and the IamentabIe resuIts o/ theìr
utìIìaatìon-IamentabIe as regards the natìonaI ìnterests o/
the A/rìcan µeoµIes. 7he mìneraI weaIth o/ A/rìca ìncIudes
98% o/ the WorId's deµosìts o/ dìamonds, more than 90%
o/ ìts Chrome ore, 50% o/ ìts cobaIt, 50% o/ ìts
µhosµhates, 55% o/ ìts Manganese, 40% o/ ìts bauxìtes,
30% o/ ìts uranìum and 30% o/ ìts coµµer. A/rìca µrovìdes
73% o/ the WorId's cobaIt, 87% o/ ìts goId, 38% o/ ìts
manganese, 35% o/ ìts Chrome, 38% o/ ìts µhosµhates,
33% o/ ìts coµµer, 10% o/ ìts ìron ore and 7% o/ ìts
International Business Billy C Sichone 108
Yet the µroductìve /orces o/ A/rìca are at an extremeIv Iow
IeveI o/ deveIoµment. 7he Contìnent accounts /or a mere
0.9% o/ the WorId's ìndustrìaI µroductìon. A/rìca
µossesses one /ì/th o/ the WorId's hvdroµower resources,
/rom ìt come over 50% o/ the WorId's exµorts o/ oìI, 70%
o/ the WorId's outµut o/ cocoa and a thìrd o/ ìts co//ee.
NevertheIess, 30 o/ the 31 natìons cIassì/ìed bv the 0nìted
Natìons as the WorId's Ieast deveIoµed are ìn A/rìca. 7he
aggregate gross µroduct o/ A/rìca amounts to no more
than 3.7% o/ the WorId totaI and the average µer caµìta
annuaI ìncome ìs $ 188. A/rìca has 480 mlIIlon
lnhabltants-aµµroxìmateIv 10% o/ the earth's
µoµuIatìon. Yet the contìnent's share ìn the WorId's outµut
o/ staµIe µroducts does not exceed /ìve µer cent. Hence
A/rìca ìs two or even three tìmes worse o// ìn /ood
suµµIìes than the WorId average' (PP73/74)
Of course people with a contra opinion may dismiss the
socialist’s view (Valentin) point as mere propaganda since the
cold war was at its height at the time of writing but methinks,
the data carries a lot of truth and weight.
In a nutshell then, this marginalisation is achieved advertently
or inadvertently by:
1. Having closed markets to African products. The
Economic groupings like the European Union,
USA have effectively blocked African products.
The GMO controversy threatens to further block
the African products from Europe.
2. The high and unrealistic standards set up by the
groupings. Some standards are so ridiculous that
this data was correct as at 1983
*Refer to a book called “Outer Space: compiled by the CRS pursuant to public law 88-246” 1990 edition
International Business Billy C Sichone 109
one hardly needs to be hyper intelligent to discern
the motive behind the standards.
3. The crippling conditional aid given to the African
nations. The GMO saga of 2002 again emanates
from the free aid offered by the USA. Usually,
whenever a powerful country gives aid liberally,
there is usually a catch behind the bait. For how
can you stand against the person that feeds you?
4. The high debt burden inherited from the past
much weakens the positions of many nations. The
little that is generated is all sent to service the
never-ending debt. This position in turn
compromises the country’s prowess to bargain let
alone re-invest to build the economy.
5. Unfortunately, the negative reporting by the
world’s press has built such a terrible reputation
for the African continent that by and large, the
forgotten continent is viewed as having nothing to
offer but death, hunger, war and never ending
decay. This has led to a high bad will, if ever such
a word exists. Thus, any thing hailing from Africa
is treated with contempt, suspicion or of less value
than any thing say from China or the far East.
6. The IMF/World Bank interventions are only short
term and thereby cosmetic in effect.
Infact, D.R.F Taylor has asserted that here ever these bodies have gone, there is either nil growth or
negative growth. Where growth has been recorded as a result of their intervention, the parameters are
questioned. Refer to “Development from within” by Taylor & Mackenzie 1992 edition pp 217-20.
International Business Billy C Sichone 110
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l ll lf the alleged marginalisation is indeed real, to what extent then
has this situation affected Africa? In generally, we can safely
assert that Africa has been marginalized in all areas and as far as
possible but the following points immediately come to the fore:
1. The African continent is left out in the major decisions that
affect global trade/economics. For instance, no African country
is represented on the G8 while Russia, with a weak economy is
considered when it coughs.
2. The poor infrastructure forbids the African continent to
contribute meaningfully as it is too weak to have a significant
punch or voice. It is reported that African business accounts for
just about 1% of the total global business.
3. In addition to the poor infrastructure, the poor communication
and road network forbids speedy development thereby making
Africa less attractive for foreign investment.
As a result of 3 above, many investors do not invest much on the
continent but externalize all profits to their countries.
The feeble economies means that the nations’ politically powers
are easily influenced to bow to international pressure. A case in
point is the policies imposed by bodies like the IMF and other
Herculean financial institutions. Refer to the effectual call to the
Zambian Government to privatize the remaining critical
Parastatals. Although the Government seems for a while to with
stand the pressure, it knows where the finger that feeds is and
dares not disobey too much. In all cases, the dictates cannot be
questioned. As earlier intimated, in extreme cases, these
International Business Billy C Sichone 111
selfsame powers can even dictate who becomes president or not.
That is the price of poverty, it is a crime.
The eIIect oI OIobaIIzatIon on AIzIca
T TT The actual extent of the impact of Globalisation on poor Africa cannot be
fully determined but suffice it to say that that effect is so devastating and
crippling that it would take many generations to rectify the problem,
given the present snails’ pace of development. The following points
attempt to point out some of the salient effects that have resulted in these
1. The African nations are fast losing their
2. The African nations are disintegrating further
economically due to the weak base. The GDP keeps
falling and sliding helplessly into the poverty miry
3. The nations, due to poverty, engage in endless
civil wars to their own detriment. This results from
the fight to control sections of the country that
harbour rich mineral deposits.
4. If there are two major tribes, they engage in Shaka
like civil wars to gain supremacy. This again is
5. Africa has remained in the ring fighting for the
floating trophy with itself while the developed
countries snatch their goods unawares. The saying “
When elephants fight, it is the grass that suffers”
holds true. In this case, the grass is the economy and
the elephants are the politicians. Interestingly, while
the giants are in combat, the monkeys watch
excitedly while pelting the fighters and munching the
fruit. This is what the rest of the World is doing to
Africa. While the battles rage on, globalization is
gaining momentum and hurtles along.
International Business Billy C Sichone 112
AvaIIabIe optIons Ioz AIzIca
ϒ ϒϒ ϒ
The only options left for Africa are the following:
1. Scale up and strengthen on regional grouping like
NEPAD, SADC, ECOWAS or the AU. This is the only
way that countries on the same footing in terms of
development will improve. The African market is large
and will be enough to generate economic development.
A start is needed somewhere. Hannou has made a terrific
comparative study on this in his 2006 PhD thesis, worth
2. Strengthen the economies by investing in the production
base. This is the only way to stand on own feet. Libya is
a shining example of a country striving to stand on its
own feet. In that way, Libya is not a push over nor can it
be ignored. The strengthening of the economies is the
only key to recognition.
3. Investing in research and development is another way to
keep abreast with the times. Hitherto, the Africans have
been made to believe that only what comes from the rich
is good enough while what is made locally is archaic,
substandard or obsolete. Granted that that may be true in
many instances, but this should make the Africans
It would be worthwhile reading the excellent article by Professor Anthony Hawkins that appeared in the
Southern African Economist issue of Feb/March 1995 pp24. In the said article, the Professor asserts that
there is a missing link even in the most renowned countries like Ghana and Thailand that have had an
annual growth rate averaging above 5%. He points out that in carrying out remedial repairs on a crippled
economy, two stages or gears have to be engaged: 1. The first phase is on adjustment and stabilization of
the economy in areas such as arresting the sky rocketing inflation. The second and crucial stage includes
institutional and structural reforms such as privatization, reengineering etc. Many nations more easily pass
the first stage but the cracks of the matter are at the second stage where non profitable institutions are
privatized and in the process, job losses take place resulting in immense suffering. This second stage is
equally critical in establishing investor confidence as international and local players fill up the gap left by
the government. The problem in many African countries is that the gap remains yawning despite the
recorded growth. In the words of the professor, “Several African countries have got the fundamentals right
in their SAPs, but the supply response is not forth coming”
International Business Billy C Sichone 113
determined to improve. This approach may take many
years but is necessary.
4. Franchising many of the big names in business like Coca
cola may be the way forward if # 3 above is not feasible.
The World will know that Africa can handle certain
issues well. In the process, Africa will learn the ropes,
much like what Japan did.
5. Fight corruption at all fronts no matter what the cost.
Perfect hatred for corruption must be emphasized at all
forums. For this to be appreciated, campaigns are needed
by credible people, not the calibre of those Zambia has
known in the 10 years from 1991. Such fragile
economies can be further crippled just by one signature
of a Doctor of Corruption, as was the case in Zambia. If
South Africa does not watch carefully, it too will slide
into the same slough of despond.
6. Elect Visionary and strategic leaders. This is the need of
the times. The times demand that Africa has leaders
rather than bosses or clowns to grace those lofty offices.
By and large, most of the African politicians run for
public office as a fund raising venture. No wonder they
forget their obligation to the electorate the moment they
get those Porsche vehicles using the hard earned
7. Priotise issues rightly. The cancer that has bugged Africa
is lack of vision and the ‘inclined plane stone rolling’
into the future with no specific objectives or benchmarks.
This scenario clearly shows that the people are not
serious or have o goal at all.
International Business Billy C Sichone 114
8. Reward innovation. There should be a deliberate effort to
recognize and encourage innovation and
entrepreneurship in the region. For instance, local
inventors must be promoted and their inventions carried
forward far and wide. Some how, Africans feel inferior
to the rest of the World. This rewarding should also
trickle down to rewarding labour as well. As opposed to
giving slave wages, people will feel valued and
appreciated. Slave wages are the breeding ground for
theft, anarchy, slothfulness and low self-esteem.
Many other options remain open to mother Africa but the desperate
need of the times remains strategic visionary leadership. Are you
that long sought after leader? In the ensuing Chapter, we consider
the future of Africa in this highly dynamic global context.
International Business Billy C Sichone 115
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The Iutuze oI AIzIca In tonozzow¹s gIobaI vIIIage, Its
zoIe and posItIon
l ll ln future, Africa is likely to arise, given the present realization that it is
lagging behind. The increased use of pervasive technology (such as IT) in
many countries is commendable because this leads to quicker decision-
making, planning and development. How ever, let it be known that
competing with the USA for example is like a rat playing a tag of war match
with an elephant, it just won’t work! The best Africa can do for now is to
work with the USA, learn the ropes and improve on those. Further, Africa
holds a lot of promise for service industry such as tourism. The vast
stretches of land with it unique species of animals should attract scores of
tourists. On the other hand, a great wealth of raw materials still lies untapped
or disturbed in the African soils. Everyday, the African child treads around
on untapped wealth. In coming days, these should be exploited and used. In
that way, Africa will be engrafted into the global village. Although Africa is
called the “forgotten continent”, all covetous eyes are upon it, meticulously
watching all its movements. The continent holds promise but all this will
not be unless Africa discards all the impediments that have been highlighted
in the earlier sections.
From a strategic perspective then, Africa still holds promise and will be a
powerful voice in the not too distant future, perhaps one or two of the
African states will be numbered among the G9!
In concluding this part and having taken deep thought over this matter, we
would like to submit that we can safely agree with and assert that the first
school of thought is indeed right for Africa has actually been marginalized
hitherto. It has not been viewed as an equal partner but as a “by the way”.
That not with standing, Africa has to some extent contributed to the dismal
view and must needs wake up to the current and future realities. The World
is too fast to wait for lingerers. As some one has quaintly quipped “The
World loves winners and has no time for losers”. African must aspire to be a
winner so as to be heard.
International Business Billy C Sichone 116
Our literature review and study has been long and protracted but fruitful
having ploughed through this avalanche of books, what have we yielded?
What conclusions have we safely arrived at? From what has been researched
so far, we can safely assert the following findings:
1. That international business is getting more complex
2. That global business is dynamic and complex relative to
3. That the advent of IT has enabled quicker decision
making to take place and thus increased the pace of
4. The international business person must be aware of the
differences in perception of different issues from place to
place e.g. time, taste, dress, moral ethics etc.
5. That one transaction in one part of the world has a
rippling effect on another many thousands of kilometres
6. That although capitalism seems to have triumphed, it also
has major pitfalls that need to be watched and managed
7. That even the most developed countries like the USA
also fall into the trap of unfair trading habits that are
meant to protect the home market.
8. That other once insignificant trading entities have now
taken over some areas of business in World trade due to
their high quality and customer focused products e.g.
Japanese cars have robbed the USA of a lot of market.
9. The giant economy countries like the USA need other
players to survive, hence the forming of economic
blocks. We have arrived at a stage of interdependence
rather than independence.
10. Half the time, the expatriate is at a loss when they return
home to the country of origin, as many things will have
changed, especially in places like the USA.
International Business Billy C Sichone 117
11. The advent of e-commerce is slowly forcing the large
multinational corporations out of business as only one
person can do much of the work that previously need an
army of workers to accomplish. The paperless virtual
office is at last in sight.
12. The brand name is what matters most rather then having
huge manufacturing complexes and assets e.g. Coca cola
has sold out most of its assets not the brand name.
13. Increasingly, we are heading towards the paperless
virtual office where people will not need to leave their
homes to work, as IT will have enabled them to work
from any location in the World. This includes travel to
attend conferences etc. The video conferencing facility
will take care of that.
14. Companies and individuals must be dynamic and be
ready to be constantly changing frequently.
15. The commodity today is slowly shifting from physical
asset based to knowledge based. In the past, what
mattered was how long one took to accomplish a task
rather than the skill used.
16. With the advent of high tech, the world in indeed is
turned into a global village where information exchange
is high thus leading to faster and quicker decision-
making. To keep afloat, one has to be ahead of
17. Closely connected to 16 above, cutting edge technology
is changing the way business is done henceforth. The
virtual company is fast taking over with most of the jobs
outsourced rather then made by the brand name owner.
Bill gates gives insight into that arena in his article “The
price of the future”
18. The International business leader has to have a thorough
orientation of different scenarios so as to clinch the best
deals world over. For example, it may be inappropriate to
send a woman delegation leader in some countries
especially in the Middle east as opposed to the west
Refer to “The B2B All about IT & Telecommunications hand book 2002” annual book let stipulating all
vital information ranging from the history and development of IT including e-commerce.
Executive Excellence Vol 16 # 3 March 1999 pp 8
International Business Billy C Sichone 118
where women have been known to clinch high profile
19. The business leader of tomorrow will need far less
material resources than the leader of yester years. Armed
with a laptop and connected to a WAN, the modern
business leader can transact business at any point of the
terrestrial ball, assuming the place has telephone lines
and an Internet provider.
20. Decision-making is going to get ever so faster, complex
and critical. Teamwork will remain the buzzword for a
long time to come. Unfortunately, when too many people
are involved in the decision and team networking,
slothfulness, conflict of interests and bickering usually
erupt leading to dismal performance…Organisational
politics begins to take its destructive toll. Many a
company has crumbled not for want of resources but tear
work rather than teamwork!
21. Resources will get scarcer by the year as world
population rises. By the same token, the business climate
will get more difficult to operate in as opposed to yester
22. High quality products are key to success.
23. Modern business, no matter how simple is demand
driven and customer focused.
24. Outsourcing is increasingly becoming a viable option to
run businesses rather than becoming a “jack of all
trades”. It is far cheaper to outsource aspects that are not
25. Many countries and Individuals fail miserably on the
International market because of poor quality substandard
goods, the failure to acknowledge other players in the
Environment and the rigid adherence to obsolete old
strategies. In the average African home for example
cannot imagine a business that is separate from the daily
family activities, issues and mixed and intertwined with
personal presences and needs. Thus the businesses do not
26. The business profitability much depends on the
conditions prevailing in the economy and at what stage of
the economic grid i.e. recession, depression, upswing etc,
International Business Billy C Sichone 119
the particular countries could be. For instance, the global
economic growth rate slowed in 2002 from the targeted
4% to 3.7%. The expected growth rate rested finally at
27. The sudden emergence of major global players like
China and India will drastically affect the business
balance in the world. No longer will the USA or EU
dominate world business agendas unchallenged. This is a
time of opportunity for the poorer developing nations.
ReconnendatIons Ioz the Iutuze
Having gone thoroughly and meticulously perused through this book, it now
remains for us to offer some recommendations for future use:
1. The Business leader of tomorrow must be far more multi
talented than that of yester years. The said leader must know
more languages, cues, culture, objective SRC, etc
2. The leader of tomorrow needs to be taken care of before,
during and after an international assignment.
3. The international Business leader should be ready to settle
and operate from any part of the world, as the world is now
a global village.
4. Tomorrow’s companies must be agile and ready to mutate
at any time and consistently so.
5. The quality of goods must be high, at the right price and
6. The present bureaucratic, rigid and inflexible
multinational corporation must be ready to mutate constantly
in the light of the varying changing scenes in the
7. The business leaders of today must be ready for the
imminent shift towards the virtual company and the rise of
8. Companies and individuals must ensure they have access
to the right, relevant and useful information timorously for
Source: The Sunday Post newspaper, 17
November,2002 pp7 # 2223SU50
International Business Billy C Sichone 120
9. This is an age of interdependence
independence. Gone are the days when entities existed
solitarily in a “vacuum”. There is need for collaboration,
networking and establishing databases.
10. People should watch against adopting management fads
as these have led to untold disasters on the international
11. To be more attractive investment points, nations should
handle the inflation well and increase investor confidence
via good liberal favourable laws that foster an enabling
environment for all and sundry. For instance, the Zambian
Inflation rate stood at 18% most of 2002 but the aim had
been to stabilize it at 13%. Similarly, the GDP was targeted
to have been raised to 4.2% but stood at 3.7% as at 18
12. Businesses must concentrate on core competencies and
outsource or buy the rest. For Example, Zambia’s core
competence lies in the service industry such as tourism
Although the nation can equally perform well
in the mining sector but the high capital investments forbid
this. I would recommend privatizing the mines and but
holding some interests by way of share holding while buying
franchises and strengthening the tourism and agriculture
sectors by the same token. This, in the long run will bring
about stability and economic development rather than
competing with the world’s super economies, for they have
been at it for over 300 years!
13. A thorough study of the impact of e-business on the
conventional International business is recommended. Areas
Although Valetin et al dismiss the concept of “interdependence” as another Western ploy to paralyze the
poorer countries further so that they could reap more at a lesser cost.
Fad: This is “a practice or interest followed for a time with aggregated zeal” Webster’s new collegiate
dictionary (Springfield, mass.: Merriam, 1976) p410.
Sources: Workshop addressed by the Bank Governor on TV as well as the post Newspaper of 18
A case in point is the opening of Africa’s biggest game park in Mozambique recently linking three
National parks in three different countries, Mozambique, Zimbabwe and South Africa. Refer to the Post
newspaper of 10
December, 2002 pp14.
Dr Kaunda, in his tenure advocated a change from Copper to Agriculture and as such pumped in K
400,000 million when the rate was K1.2 to US$ 1. This was perceived as the only way to achieve economic
independence. From “A new international economic order” pp 68
International Business Billy C Sichone 121
such as the magnitude of, the history and future of e-
business needs to be more meticulously documented.
14. African countries, being poor and backward should
franchise the world business like the Mc Donald’s and
thereby develop quickly. They cannot compete with the
economically advanced nations.
15. For Africa to blast itself out of the economic quagmire,
there is urgent need to move from crisis management to
Strategic futures thinking as suggested the Africa Recovery
magazine Volume 9 # 3 of November 1995.
16. For Africa to be effectively heard in the World today,
there is need to promote a shared passion where the Africans
begin to view themselves as potential equal partners with
other nations. There is need to long for a time to take charge
of its own destiny, much like the pulse Pan Africanism
carried about the liberation struggles of the 1960s and 70s.
Africans should share the same dreams and fears not with
the present distorted and divided loyalty that exists. The
African Union launched in South Africa in 2002 is bound to
failure because the individual African leaders would never
for a moment actually entertain the idea of relinquishing
power, perhaps their successor, not them! Fundamentalism,
although apparently full of passion, is half the time
irrational, misguided, unmethodical and stifles innovation. It
will not do for us. What is needed in an internalized passion
that will be passed on as a value from generation to
generation akin to a relay race. We need to arrive at a time
when leaving the continent will be the last thing one will
entertain or once beyond the borders will long to get back
17. For those wishing to do business with African states, a
condition must be set up prior to any engagement where the
prospecting profit reaper is required to set up base in that
particular country and start producing locally rather then
importing across borders. In that way, jobs are created and
the image of the country is uplifted as people sample
products made from Africa.
Africa recovery magazine November 1995 pp 1
Pascal Lissouba has written an excellent article on this in the Africa Recovery magazine of November
1995 pp 24.
International Business Billy C Sichone 122
18. If it is possible, African Nations should delink
themselves from the IMF and World Bank if possible. At
least they should be working towards that goal because
continuing in this marriage will render them life long slavery
to the developed world. As at now, poor counties are
clutched in the firm grip of the imperial agencies such as the
IMF and World Bank. It may interest you to know that the
USA alone holds over 19.83%
of the voting power in the
IMF while the poor countries combined hold less than
♣ ♣♣ ♣
, meaning that each country holds less than 1%. From
this statistic alone, we can tell who calls the shots.
19. Economic co-operation amongst developing countries
must be enhanced further than hitherto fore. This calls for
collective self-reliance and deliberate preference of trading
amongst themselves, much like what the richer countries do.
Of course a lot of issues might be compromised such as
quality but there is always a starting point. In that way, there
will be fair trade terms and mutual development. Imagine
for a moment, a pauper competing with Bill Gates at an
auction sale to purchase an item it is a non-starter! Ankie’s
insight into this approach is commendable. Refer to page 86
of the book “The Third World in Global Development” for a
clearer exposition of this point.
20. Poorer Nations should avoid getting into those enslaving
conditions that comes as a result of borrowing more than the
Special Drawing Rights (SDR) from the IMF. Some of those
conditions are ridiculous and antagonistic to the present
progressive global economic climate. This calls for strategic
thinking on the part of the borrowers lest they drink in sink
and hook, to their detriment and utter destruction.
21. Poor nations should make effective use of the
potentially powerful social fabric and network as they
mutate to a more developed setting. The wealthy
countries, especially the West have fragmented,
egocentric, individualistic family structures and have
Source: The International Monetary Fund, purpose, structure and activities book let pp 8 for April 1980.
Refer also to Ankie Hoogvelt’s book, “The Third World in Global Development” pp 84
Source: Ankie Hoogvelt, “The third World in Global Development” pp 84. Ankie asserts that of the 141
member countries, 114 are third world Countries that constitute the 36%. This position makes the USA
single handedly able to block or veto any major proposal for change or reform in the IMF.
International Business Billy C Sichone 123
developed a system that can handle such. The Japanese
on the other hand have developed their own unique
system that works well. The complex company structures
have little to do with the US systems
. Thus, Africans in
particular need to discover the strengths within our
framework and implement to strengthen the same. In
fact, Africa has great learning points as it stands at the
cross roads as it were, to “cut and paste” best practices
from various players on the international scenario, albeit
in a modified form.
22. The poorer nations should be wary of receiving aid that becomes
the mainstay of the economy rather than a mere supplement to
what is already being done. In that way, dependence will be
minimized and the nations will safe guard their sovereignty.
At last this legendary work finally closes its pages having most ably dealt
with the vast subject of International business! I would therefore strongly
urge any one intending to work in an international environment to avail them
selves to these selfsame resources and “soak” in the classical monumental
works until they have “sucked out all the juices”. It has been mesmerizing
globe trotting across this terrestrial ball within the confines of web pages and
otherwise. This scan is non negotiable for the potential international
With my mission now completed, I now rest my case here!
One Japanese Development professional, Masaki Miyoshi strongly believes that among the many things
Africa needs is to discover its own strengths, and turn them into strengths. He thinks that has partly
contributed to Japan’s success story, although he also thinks that Japan’s long history of industrialization,
though latent and unnoticed for many years has helped to propel Japan to higher orbs but working within
the Japanese unique context of the complex communal and extended family system, unlike in the Western
World where each individual is like a “stand alone computer” that periodically connects to the website and
shuts off the rest of the time.
International Business Billy C Sichone 124
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Union Bank goes under Billy Sichone
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Union Bank goes under Billy Sichone
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Union Bank goes under Billy Sichone
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Union Bank goes under Billy Sichone
Case study 2-The Mongu scenario-Rice
≈ ≈≈ ≈
⊗ ⊗⊗ ⊗
In the early and late 1990’s whenever one announced that they were making
a journey to Mongu, they would instantly raise eyebrows and queries as to
why they dared and bothered to go there. The image then was that the west
was the worst in terms of livelihood and activity. The place was perceived as
full of nothing but sand and a desert climate. Little did they know that this
once despised place is potentially the hub of Zambia’s prosperity because
the place has more than meets the eye.
Today, one just needs to stand by the roadside and observe how many buses
that stream into and out of Mongu day and night to see the increase in
traffic. No less than three buses arrive and leave the Mongu every day
because of the newly discovered trade from this once despised place. What
really caused such an attitude and what has caused the sudden upsurge of
traffic to this place? With the human eye, it seems for many years the
picture portrayed was that the natives are too sectarianistically conservative
and a repulsive lot who jealously guarded their wealth regardless. At one
time it was said of the place that if one did not know the Royal Lozi dialect,
there was no chance of succeeding in the place. There may be a grain of
truth in the accusations but the Lozi, like any other value their culture and
will do any and every thing to defend and promote it. As a matter of fact,
they are actually a very friendly lot when given the due regard and one
sincerely shows that what they are interested in is not theirs but them. In that
way, one will worm their way to success and comfort among these lovely
That besides, as the throne changed hands, and as more and more people got
exposed, the foretaste of the Bulozi beauty begun to show to the outside
world. The first was the Fish then followed by rice, cashew nuts, meat and
many other rare goodies. Infact, the sand is excellent for glass making and
other related activities.
As such, people started to trickle to Mongu in the late nineties but today, this
tiny trickle is now a flood. People literally pour in from all corners of the
Although still a minor crop in 1994 (only 7% of the total cultivated area), rice production has known an
upswing since 1994 when World Vision and other developmental organizations have undertaken to
promote it. Opportunities for western province pp42
According to research conducted in 1995 by Mulwanda and team, 333 tones are caught every year from
the lower Zambezi. Roughly 75 % is consumed locally while the rest is exported to Lusaka and beyond-
Opportunities for western Province Maimbo,Huijsman,Mulwand and Lof pp50
Union Bank goes under Billy Sichone
globe to have a taste of the rice, fish and mineral prospecting. These people
are all littered around Mongu and beyond and in some cases, business people
actually camp in the areas of business! This is unprecedented.
But what are the factors that have led to this four-fold increase? Many
answers could be given but from a layman’s perspective, it is because people
have suddenly awoken from the long slumber of considering Western
province of no economic value. They have discovered among many things
that the area produces world-class rice that is of atleast four grades, Supa
(the finest), Burma, Angola and Blue bonnet. This high quality rice
competes with the best brands on the World Market. In addition, it has been
discovered that the Barotse plains have a potential of feeding the whole of
central Africa with grain but for the land tenure politics that linger in the
background. The other attractive feature about Western province is the
reported presence of diamonds at Shangombo, the rumoured presence of
Gold, oil and other relatively undisturbed natural resources such as timber,
river sand and patches of potential arable land. Cattle rearing is another
industry the West boasts of and infact, it is believed that Western province
has more lives stock than any other province. Tourist attractions such as the
Sioma falls, the Liuwa and Siomangwezi National parks, the beautiful
scenary and indeed the natives that add to the incredible profile of the
Western province. The road to Kalabo now under construction will open
another route to Angola
and beyond. Now that war is ended, trade can
begin in earnest. As such, Kalabo, with its potential Iron ore mine is slowly
becoming a spot light. We hardly need to mention the planned road bridge
at Katima Mulilo to link Namibia, Zambia and the Congo DR
. All in all, the
potential is great and only needs to be tapped.
What are the fears? The obvious fear is the plunder that has ensued and
continues to as people come and go out of the province with one single
purpose, to profit. This is always done at the expense of the locals. For
instance, Shangombo, a little district in the remote corner of the country was
until recently hardly heard of but today, due to the “diamond rush”, the place
habours all sorts of characters lingering there! You will find people from all
parts of the World, including prominent international business there. All
Incidentally, Angola is potentially the richest country in the SADC region but for the civil war that raged
for over 24 years. Refer to Africa connexion International Magazine pp 23 Volume 9 second qtr 1994. This
type of carnage has distorted the economy not only of Angola itself but other regional countries as well.
The demise of terrorist leader Jonas Savimbi gives hope that the Kalabo road will be useful, apart from the
long abandoned Benguela railway.
Refer to The Zambian Farmer Magazine Vol 3# 2 of April 1998 pp16, 17 as reprinted from the African
review of business and Technology.
Union Bank goes under Billy Sichone
rank and file are found there. When asked, they simply reply, “There is
potential business here”
Looking ahead, one anticipates more and more influx of business people
flocking to Western Province and there by lifting the Economic status of the
town. Checks and balances must quickly be introduced to avoid degradation
and plunder of the grand resources that western Province is endowed with.
The Politics and conflicting policies between the State and the Royal
establishment must be amicably and quickly resolve issues lest the area loses
too much through plunder before it is realized. For instance, as at now, the
Sesheke/ Senanga stretch can make one weep when they consider the
wanton destruction that has occurred on the forests in the last decade or so
and that largely by foreigners! These people take the rare high-grade timber
across the Zambezi to build beautiful towns and cities, out of Zambian raw
materials! An appeal to the powers that be is that remaining at daggers
drawn will not curb the degrading anthropogenic activities. That not with
standing, let us watch and see what lies in store for Mongu and the rest of
the country as international trade makes its maiden voyage here wards.
Questions for Consideration
What do you think is the single cause for the upswing in trade in
Do you think Mongu in particular will develop as a town or remain
What, in your own opinion, could be done to resolve the conflict
between the State and the Royal Establishment, not only in
Western Province but else where?
What economic benefits will accrue to Kalabo after the road is
complete 4 years hence (from 2002)?
Would you be willing to invest in Mongu and why?
Union Bank goes under Billy Sichone
Case study 3-The race to Mongu route superiority (CR, RPS, JR, GK,
At one time a trip to Mongu was the most dreadful of journeys to undertake.
Not only was the journey long, strenuous and sweaty, but also it was one
that a person had to physically and emotionally prepare for long before hand.
The road was as bad as the vehicles that would be used. A single one-way
trip would take no less than three days! As though that were not bad enough,
the route was serviced by one fleet of state owned buses the famous United
Bus Company (UBZ)!
Today, the picture is completely different, as one can manage to travel to
and from Mongu in a single day! How so different a scenario! What has
caused this and what has been the impact? As you might be aware, the
number of buses servicing this route has increased from one to about four!
When the UBZ folded in 1994, at the liberalization of the economy, other
transporters sprouted and started to service the selfsame route though they
were more unreliable and unpredictable than the UBZ that had fixed and
confirmed times. As these initial transporters took on the route, a bus
popularly known as Time bus or JR came on the scene. This proved to be
more agile, comparatively customer friendly and had more capacity. This
move caused others to fizzle out, as they could not compete. But just when
JR was becoming the established route leader, RPS made a sudden
appearance on the horizon, this time even more efficient than JR! There
were reported fights and violent instances between the rivals. In no time,
RPS robbed the market though JR still remained a formidable force, in the
peripherals though. RPS then became the upper class market bus while JR
serviced the poorer sort of travelers. As a result of the near monopoly on the
route, RPS became too comfortable, obstinate and less customer focused.
There were instances when the RPS crew would violently hound out or
insult customers and still get away with it.
Alas, in 2000, CR smelt the profit on the Mongu route and were irresistibly
drawn to the route. This move shook RPS not a little as they had not
expected any other competitor. CR came with modern marketing strategies
that completely out witted RPS. Some of the weapons used were introducing
a customer friendly service and at times even offer drinks or fruits free of
charge! Another avenue was the introduction of good quality, timely buses
fitted with Video/TV. This was too good for a Mongu bus by then!! In
addition, the service ensured all the buses were never overloaded and
The UBZ & Zambia Airways closed in 1994. See the Southern African Economist Magazine of Feb/Mar
Union Bank goes under Billy Sichone
initially begun with a lower price so as to capture the market. In n o time,
people were won over enmass and what people were waiting for was the
funeral procession to the bus graveyard for the once potent RPS and JR.
As providence would have it, in 2001 after reigning unrivalled on the route
for over a year, Euro Africa heard about the fame and richness of the
western province route and joined the race. Determined not to be out done,
Euro begun with similar strategies that CR had employed except that they
emphasized on timeliness on all routes. This has worked well and potentially
dislodged the undisputed Mongu route heavy weight champion-CR. For a
season, RPS and CR were paralysed because they were in the same market
niche with Euro. JR still limped along but better than the other two as it
serviced the poorer sort who would be packed like sardines in the buses,
with luggage clamouring all over the place.
As this case study is being is being written, the battle has become hotter as
the buses now start off as early as 04:00 in the morning and arrive at their
destinations at about 10hrs and then make a return trip at 14 hrs, all in a
quest to get that extra buck!
Thus, the battle for route superiority rages on…
Questions arising from the case study above.
What principles are behind the success of every new bus fleet that
takes the route?
What, in your opinion is the ultimate solution to constant loss of
market by the buses?
What things do you think has caused the sudden increase of human
traffic to Mongu?
Do you think the happening on the Mongu route reflect the
happenings on the international scenario? Prove.
Do you think, the economic activity at Mongu impacts on another town, say
Harare in Zimbabwe? If so could you give an explanation?
Marks and Spencer profits continue to slide Billy Sichone
Marks and Spencer profits continue to slide Billy Sichone
MARKS & SPENCER PROFITS CONTINUE TO SLIDE
Very few have not heard about the successful Marks & Spencer chain store of the UK. It
is by far the number one clothing retailer having experiencing phenomenal growth for
many years until 1998 when it bagged an unprecedented profit of £ 1.2bn. But now, like
many other businesses, the growth and profits have eluded the chain retailer lately. The
company appears to be buffeted by disappointing results from every front to the extent
that it has had to shut down a number of strategically placed stores in mainland Europe as
well as sell its US business outlet. These developments signal a drastic reversal in the
hither to prosperous company. What is happening? Are things well with Marks &
In the article, “Marks & Spencer profits continue to slide” which appeared in the
Wednesday May 23
2001 Post Issue, we see the company experiencing turbulent times.
It is still viable and is making strides to address the adverse situation.
Marks & Spencer has had problems for some time now, and as such, it has embarked on a
restructuring program, so far having cost a whooping £ 335.4 million. The goal is to
make the said company, agile, profitable and more customers focused again, thus
returning to profitability. In order to carry out this mammoth task, Mr, Vendvelde, the M
& S Chairman, has put a number of strategies in place. These strategies will ensure that
sources of finance are identified and utilized accordingly.
Largely, the cash will come from sales, disposal of assets, closing of non–profitable
centres; job cuts as well as relocating from the expensive & luxurious Banker street
headquarters office to the cheaper Paddington Basin new head office. The pending job
cuts for instance; will reduce the work force from the present 3,500 to 1600 in 2003.
Having sourced the funds, the company intends to address the problem areas such as the
adult clothing division where the problem specifically lies in the women’s wear section.
Once the exact problem root cause is diagnosed, appropriate steps will be taken to
reactivate that area and any other. Furthermore, the retail chain store plans to invest more
in the food and services areas. Other possibilities exist but in all there areas, greater
quality and appeal in a better store environment will be the hall mark.
All these strategies look fantastic but as Vandevelde quips, “The results will not be seen
over night, but our customers will see a gradual and progressive improvement as changes
The risks associated with the raising of funds from within is that the various stake holders
such as share holders may not be entirely pleased because the company will appear to be
shrinking instead of expanding. Furthermore, the company may not declare big enough
dividends and thus lose stockholder confidence other disadvantages could be the job
losses as well as a potential major shift from the traditional strength of retailing into the
Smith and Wesson to change hands Billy Sichone 147
On the other hand, advantages come with raising cash from within one of them is the
minimizing of debt costs as well as not changing the capital structure fundamentally. In
the long run, when the company is viably profitable once again, the chain store will
declare more and bigger dividends. This is a survival time and the times demand that the
company mutates swiftly or risk tumbling to the ground, like many others have done. The
Dynamic competitive business environment forbids M & S to stand at ease but must of
necessity act swiftly and drastically.
Personally, I agree with the M & S strategy as long as a proper SWOT and environmental
analysis has been done. Also, I will vouch for the M & S mores if appropriate
contingency measures are put in place in the event of the worst coming to pass. Issues
such as a superb cash flow must be guaranteed after the restructure. Further, I strongly
feel that these reforms must be implemented diligently, prudently, slowly and cautiously.
There must be a continual reading of the environment to make sure that M & S ekes out
the best route.
After all is said and done, I have no doubt that we shall continue to enjoy the high quality
goods from Marks & Spencer many years hence.
9. The Post newspaper, Wednesday March 23, 2001. Issue No 1738, page 8.
Marks and Spencer profits continue to slide Billy Sichone
Smith & Wesson to change hands
When Greg Hutchings took over the reigns of the Tomkins Company as
Chief executive, he immediately went full throttle to turn around the
company. From a mere £ 17 million puny engineering firm to a global giant
turning over £ 5 billion a year, Hutchins had reaped off the impossible
pending to be listed among the management legends.
The once simple engineering firm begun to change as from 1983 when
Hutchins commenced implementing his mammoth development drive which
among many things, included acquisition, expansion and diversification of
the company business. As such, the Tomkins bought many companies such
as the Smith & Wesson, the Baker Rank Hovis Mc Dougall, Lawn mower
makers, Murray and Hayter, and grocery products manufacturer Red wing. It
was a bold and risky investment venture but Hutchins undauntedly went
ahead. For a while, all went well but slowly, change and decay begun to set
in resulting from myriad problems rocking the company. But what went
wrong? Why did the company begin to decay after glittering so brightly? A
number of problems are highlighted in the article “Smith and Wesson to
change hands” that appeared in The Post issue number 1732 of Tuesday 15
May 2001. The said article begins with the sentence that Smith & Wesson
was to return into US hands having been owned for 14 years by the UK
company, Tomkins. The article highlights the fact that as the Tomkins begun
to expand in to a conglomerate, it became too large bureaucratic rigid
unresponsive, complex and too diverse. As a result it was neither as focused
nor strategically responsive to the rapid business environmental changes. In
addition to the complexity and bureaucracy, a chain of lawsuits trailed
around the company. Sadly, the maverick chief executive also contributed
by abusing office that led to his resignation in October 2000. All these
problems then, caused all the subsidiaries not to thrive as expected.
The only way forward then was to reduce the probability of totally running
bankrupt by a change in strategy. The only option available at the time was
to be begin shedding off the non-essential & non – core businesses. Hence,
the selling spree that ensued. These changes, although necessary, were costly
in that many issues had to be addressed such as reorganisation &
To date, all the earlier mentioned companies have been sold off with Smith
& Wesson as the latest. The said latter company was purchased at $ 112m in
International Business Billy C Sichone 149
1987 but sold 14 years later at only $ 15m. Sources say that it is even a
wonder that S & W managed to sell at all, since the company is battling to
survive due to law suits as well as its shaky image back home having
displeased certain quarter about fire arms sales.
The Tomkins financial crisis was so critical that the very existence of the
company was threatened and needed drastic solutions to rectify problem. As
earlier intimated, this came through restructuring and selling off all the non –
core companies, thus saving Tomkins. To day, it is slowly returning to its
directed goal of engineering. But why did Tomkins land in this mess in the
In my thinking, perhaps the company initially had too much excess cash and
decided to invest at any & every opportunity. It seems that no proper risk
analysis was taken in terms of the company sensitivity, return on equity, net
present value, capital structure and the cash flows that would ensue. Ideally,
before embarking on any project, there is need to carry out a detailed cash
flow analysis to predict how viable a business could be in the short or long
run e.g. 5 years hence. Thus, we can see that human factors of personal
preference or the unguided quest to achieve and conquer were at play. In the
end, the company is at the brink of collapse. We clearly see that the fact that
we have excess cash flow is no guarantee that the same favourable
providence will continue, hence the need to be meticulously watchful.
With the sales gone and investment risk minimised, Tomkins can now shift
its focus to its core – competences that will ultimately carry the day for it.
1. The Post Newspaper, Tuesday May 15
2001. Issue No 1732 page
International Business Billy C Sichone 150
Adam Opel AG (A)
On November 9
1989, an epoch making event occurred between the West
and East German border. After 28 years, the dividing wall of hostility
obeyed gravity by falling to the ground, amidst much jubilation. There had
been a world of differences between the Capitalist west and the Communist
East Germany for many years. Now the time had arrived when least
expected especially following affirmation pronouncements of Honecker (77)
for the wall to crumble.
Following the events of November 1989 things begun to drastically change
in East Germany as the border was opened to the rest of the world like
opening the flood gates, people poured into west Germany to look for
employment and also to experience their new found liberty. Those were
turbulent times indeed for the political and economic scenario. Politically,
people were tired of many years of inhuman tyrannical dictatorial leadership
and were calling for a change of Government rule.
The communists whilst still in power at the time, had ruled with an Iron fist,
treating people like mere “things”. They did not allow other political parties
nor any opposing views to theirs. As such, any dissent was drastically and
firmly dealt with. Usually, it was violently crushed so that others would be
deterred. But in those turbulent times of January 1990, a new political breeze
was blowing with people freely hoisting West German flags, clearly stating
their preference of German unification. By the same token, the stubborn
communist Government remained obstinately and tightly in control but of
course with lost ground, times had changed drastically in the revolution.
On the economic front, East Germany, although believed to be the most
prosperous among the eastern States lay in ruins. The economy was in
tatters, a weak currency, poor and obsolete products that were neither
competitive nor desirable. Essential commodities were neither competitive
nor desirable. Essential commodities were chronic short supply and very
expensive by the same token. The manufacturing industries were over
staffed and operating on huge losses.
The people employed were largely on family lines and thus resistant to
change. Due to poor circumstances and polices, the economy was state
controlled and as such the market forces could not freely reduce the prices
International Business Billy C Sichone 151
by supply and demand. In addition, the state had all hierarchical structures;
sentencing decisions to long wait before approval or rejection. No
innovation or quality improvements were allowed. Many a brilliant project
died on the drawing board because some political figures did not fancy the
idea. Worst of all was the rampant corruption that gripped all sectors of the
economy. This crippled any further advancement.
As such, in January 1990, after the revolution had swept across Eastern
Germany, it brought about lasting changes. A number of challenges and
implications therefore confronted Louis R Hughes, the Opel chief, as he
attempted to market survey with a possibility to investment. Among the
implications of the revolution was he had to tread most circumspectly, read
the political scenario, build relationship and attempt to strike deals for
investment. Obviously, the developments in East Germany attracted scores
of other investors to the country, much like a moth to a flame.
In the motor industry, renowned companies such as the Ford, Peugeot and
Volkswagen were all clamouring to strike some deal for either partnerships
or buyouts. This meant that Hugh had to act swiftly to out wit the others.
Although the economy had been state controlled with a record of over
employment with poor dilapidated infrastructure, the future potential of
reaping benefits were immense. Louis envisioned using the “native” nature
of Opel as a competitive advantage in the quest for market presentation. In
future, it would mean replacing the obsolete machinery, raising the quality
re–engineering as well as establishing a manufacturing presence of
international standards. All these thoughts must have raced through Hugh’s
mind as he took steps to meet the Kombinat leaders in East Germany.
Obviously, one might have the financial resources but lack information and
the acumen to network the business is perilous. Therefore, Opel had to
overcome some hurdles and grasp opportunities that came their way. Some
of the problems faced were largely political. The East regime still wanted to
hold back but the people on the ground wanted a change.
The top brass was highly corrupt, uncompromising and refused to change
with the times. Thus, to get things done, one had to carry a bribe then things
could be swiftly and diligently attended to. But as at January 1990, things
were slowly beginning to change though bureaucracy and ceremony still
held sway. Another problem Hughes faced was language. He overcame this
International Business Billy C Sichone 152
by hiring the right people to assist him. In terms of opportunities, they were
The East Germany company leaders seemed enthusiastic to have a change of
products. It was simply amazing to notice their honest object and willingness
to collaborate so as to change things for the better. One would have thought
that they would have stubbornly remained proud to defend their obsolete and
poor quality products, but not so. This was a grand window of opportunity.
Another window was the abundant cheap labour nearer to Western Europe.
Hither to Korea and China had been viewed as the cheapest but they were
far flung nations.
The East Germans were not only cheaper but honest and well educated too.
Thus, we can see that the labour market was large. Another opportunity was
the potential 17 Million market for the high quality “East German” cars
which would be churned out by Opel (Opel was considered a German
Company though wholly owned by General Motors of the USA).
The options that Hughes had then were three fold. Firstly, he had the option
to concentrate on the western market and not bother about the east; after all,
Opel could hardly satisfy the demands in West Germany. The second option
was to come to the east through the west. This was advantageous because
East Germans preferred and believed that West German cars were better.
The third option was to simply go to other third countries where labour was
even cheaper than east especially so that if Germany was to reunite, the
expenses would dramatically rise to match international standards, thus
eroding the current advantages. All these three options lingered in his mind
as he tabled his case to other board members.
If I were Hughes, my arguments would be that we go ahead and invest in
East Germany for a number of reasons. Firstly, the proposed investment, in
my own view, is viable because the industrial sites are already in place just
needing changes. The complex designs are already in place and once the
modern technology is installed, it would be cost effective. Besides, the
labour market is plentiful. Secondly, we have established good relations and
rapport with both the natives and the key decision makers. They prefer us as
opposed to other potential investors because they feel we are indigenous and
therefore known. This is a huge opportunity for effective market penetration.
Thirdly, there is a lot of enthusiasm from their side and ours to get to work
together to improve the present chaotic status. Willingness is the key to
International Business Billy C Sichone 153
international trade. Lastly, the potential market is vast. A population of 17
million should speak a great market for us. Besides, the East Germans are
educated and would willingly put in their lot to design, market and sell the
product. I am aware that after I present my arguments at the February7, 1990
GME strategy board meeting. Bob Eaton would not let Hughes go
unscathed, most probably, he would want to know what the chances of
success for Opel are, how ahead of the other competitors Opel is, how fast
Opel is and what the over head costs would be. Armed with my data “pack”
I would answer all the queries giving him statistical data as well as other
relevant information such as the accrued good will as we are viewed as an
indigenous company, which others do not have, our swift movements,
network established, prior meetings with the Kombinant and also the fact
that we have the right people on our side, happen to be “known qualities” in
East Germany. I think my arguments should put to rest all anxiety.
In my estimation, Hughes goal to become number one in the GDR is a
possibility only if he comes up with a sustain ably good strategy. Presently,
Volkswagen carries the day but a good strategy could dislodge them. The
said strategy, among other things should address quality and customer
issues. There is need to rise the quality to high international standards to the
extent that the customer must be king, treated well and served well. In
addition, the strategy should include the setting up servicing and repair
stations all over the country. Apart from carrying out frequent market
research to establish the customer needs and wants, the cars churned out
must be low cost and the right price for customers.
Further more, the strategy must address the networking framework, which
should involve befriending the key decision makers as well as being
community conscious. This may well mean producing cars that do minimum
harm to the environment as well as our contributing to social needs and
causes. In addition, our marketing must be consistently aggressive and
relevant. Hughes’ two-step multifaceted proposal seems superb because it
will ensure that 10,000 Opels are assembled and serviced as well. The
second aspect or stage of bodybuilding is equally good provided this is done
at the optimum time and with the right infrastructure.
If Hughes presents his case well in the Norstand and at GME or OPG, I am
optimistic that they will fully rally behind him, though some might initially
have some reservations. The issues of Political instability, labour market,
infrastructure would beg answering to clear some minds. Hughes should
convince them of the potential growth market value, the willingness of their
International Business Billy C Sichone 154
counterparts, the cheap labour and the envisioned political stability. Other
issues such as eventual labour costs and absenteeism could easily be dealt
with by introducing modern Management methods of teamwork, which are
not only cheaper but motivating as well. The poor work ethics, unstable
exchange rates and poor infrastructure are part of the package, which can be
worked on with time. He would have to show them the long-term goal and
Despite all the hurdles that confronted the possible investment. Hughes stuck
to his Eisenach plan because of the aforementioned reasons of potential
growth, niche potential, cheap labour and the potential 17 million market
representing 25% of the population. Having assessed Hughes’ capabilities
and insight into the East German market amidst turbulent times, I think he is
potentially good. It seems his financial and MBA backgrounds have shaped
him well for the task. some of the pluses to his credit are his ability to
appoint and use German nationals to achieve his goals. He created a team
culture and built excellent relations by the same token. His insight into the
advantages Opel has such as being indigenous, consciousness of a moving
target, contacting top business and Government leaders as well as the focus
on a market niche were all excellent ideas deserving applaud.
Having said the above about Hughes, we draw a few lessons for application.
If a foreign investment is to be undertaken successfully, the following points
must be taken into consideration. Firstly, the political environment must be
assessed; Is it right, conclusive and stable? What are the Government
policies and how will they affect our business? Secondly, the social
environment must be assessed. Is there appropriate infrastructure? Do we
have the right distribution channels? Is there enough and cheap manpower?
Thirdly, the cultural environment and attitude must be taken care of. Are the
people open to investment? How do they view us, as foreigners or
indigenous? Fourthly, the legal environment must be looked at prior to
launching out. What law will be asked in the event of a dispute etc? All
these must be will grasped and then applied appropriately as the case may
be. These were the issues at play when Hughes was surveying East Germany
in January 1990.
By that token, Opel achieved an early market leadership in East Germany,
having applied the right principles mentioned above (i.e. political, social,
culture and legal assessment). In particular, Opel sold used Opels, serviced
and repaired them. It marketed well, did a market survey as well as
networked with the key decision markers in the East whereas Volkswagen
may have over looked these and went ahead to use their good will only. It
International Business Billy C Sichone 155
could be that Opel was swifter in response relative to Volkswagen. I think
that Opel will retain its number one slot because of the cheap labour,
because it is “German” and thus part of the German landscape, and because
the right people with the right acumen have been employed. The goal of
becoming global in approach is another competitive advantage for Opel.
Being global entails implementing and maintaining the best standards that
are ISO certified (international standards of quality). It means total quality
management, teamwork and modern management practices come into play.
This takes time but armed with a visionary leadership and determination, it
is an achievable feat for Opel. In my opinion, the chances of success for this
complete overhaul are high provided the right parameters are put in place
such as continuous training, reduced costs, de staffing and opening up
management for innovation and creativity. Admittedly, this is a lot of work
but necessary if Opel is to remain competitive in the 21
It may seem an insurmountable task but I am confident that the Hughes led
team will steer Opel to success, let us seat tight and watch them perform!
1. Bower, Bartlett, Uyter Hoeven, and Walton. Business Policy: Managing Strategic
Edition, [ISBN: 0-256-1159-5] Richard D Irwin
2. Phillip Coteora: International Marketing, 9
edition, McGraw Hill, Boston,
Massachusetts Burr Ridge, Illinois Dubugue, Iowa Madison, Wiscosin New York,
New York San Francisco, California St Louis, Missouri.
International Business Billy C Sichone 156
Gurcharan Das took over the reigns of the Richardson Hindustan Ltd (RHL)
in January 1981 after an Illustrious International career with the Richardson
Vicks International (Mexico) & General foods. Relinquishing an
international job was a major decision as this was the second time he was
returning to RHL, only that this time as its President.
RHL had been a subsidiary of the RVI for a long time until Indian
government pressure forced it to change share-holding ratio from 55% to
40%. Despite the changes, the RVI still maintained an influential position
because it had its main decision makers stationed there. The forced change
in share holding by the Government had forced other equally renowned
companies such as the Coca cola and IBM to leave the country because they
refused to compromise or dilute their share holding. Not so RVI.
As earlier Intimated, RHL is part of the Richardson Inc of the USA whose
main product and strength lies in producing cold alleviating “vicks” and
other related products to deal with the skin. RHL itself was originally
formed as an engineering / building firm to construct a chemical plant for
RVI but eventually took over the marketing of the RVI products from the
local RVI branch.
This holding presence went on until the aforementioned changed RHL went
through different Managements and eventually proposed despite many
hurdles from the natives and Government who viewed it as a foreign and
exploitative company. In an attempt to overcome these challenges, the RHL
Management had tried to please the local conditions by participating in
social activities and attempting to invest in the community pleasing projects.
In that way, the company avoided some tax. As time went on however,
problem after problem began to buffet the organisation as people tried to
clamour for positions of influence and build personal empires.
It was at this critical time that Das was hired. He found a divided house. The
company was cash strapped, morale was low, labour was hostile, labour
management relations were adversarial, and turnover in management ranks
was very high. Because of governmental price controls, Management for
years had stressed volume, selling at any price and producing at any cost.
Furthermore, there was jockeying for power, functional empires,
international conflicts, legalistic management style and low mutual trust.
Phew! What a time to take over! But this was his inheritance and thus
International Business Billy C Sichone 157
determined to iron out the problems and burn the dross in the process. The
first thing he did was to assure RVI that all would be well and then went
ahead to hire the right staff while keeping the marketing goal in mind. With
the right people on board, he ensured that they were continuously trained
until a team spirit began to take root.
Having changed the attitude, his next task was to pacify the local conditions
while maintaining good relations with the holding company. Parts of the
local stakeholders were the shareholders, customers and the Government. To
do this, he embarked on product quality improvements; open participative
innovation management style, customer focus as well as aggressive
marketing campaigns. It was whilst trying to please all stakeholders that he
entangled the campaigns into producing ayurvelic, a product that though
socially helpful, was not in line with the RVI corporate products. To produce
this would have meant diverting from the original strong marketing bias to
manufacturing. This would potentially put him at variance with the RVI, and
yet it was critical for RHL to receive preference treatment from the Indian
Government. No doubt, this initiative was viewed as Palatable and
constructive to the local community. The second thing, which was
potentially controversial, was his proposal to sanction the production of
dextro be supplied to the RVI, which is the largest consumer in the world.
Both these ideas were superb but would put him at daggers drawn with the
RVI. This was a risky step but evitable in the circumstances and would only
be justified if Das convinced them (RVI) that both these would keep the
international standards as well as the RVI regulations. These were bold steps
marking out Das from other illustrious managers like Koerber or Bartlett.
The advantages of the two major products (Ayurvelis and Dextro) were that
these would firstly not only rake in a lot of profits but also boost the
company image in that both the Government and community would be
satisfied. If I were Das, I would seek to present all my facts to headquarters,
statistical and otherwise. Having shown them, I would highlight the
advantages such as profits and corporate image. I would point out the
problems such as tax that could be significantly reduced. I would also show
them the team I lead as well as their determination to succeed. All these
persuasive arguments should carry the day, I hope. If others argued on
policy and organisational international standards, I would show them that
our situation is a unique case and thus merited to be treated as an exception
to rule. I would show them that this is part of marketing and the winning of
local goodwill for future days.
International Business Billy C Sichone 158
For Das, the appointment meant being a leader, a mentor, facilitator, and
coach. He had to be visionary and determined to succeed while keeping
within the limits delimitated to him. Having been exposed widely, he
thought he could summon all his experience, exposure and proven to lead an
organisation so that it would ultimately come up as the best subsidiary to
RVI. This was his goal and passion, evidenced by the changes that occurred
shortly after his taking over as RHL manager. In the twinkling of an eye, the
once potentially defunct RHL was soon full of life and making headway. He
viewed himself as one who motivated people whether they be marketers or
not, so that they have customer satisfaction uppermost of their minds.
Despite his excellent efforts, complaints still lingered from certain quarters,
which is part of management. His was to lead RHL to conquer more market
while maintaining a high goodwill from all stakeholders. Looking at Das’
prowess, he strikes me as close to Loy Weston except that Das has acumen
to articulate things and the patience to consult and negotiate. Weston, on the
other hand, has no time because he views himself as the decider on the
ground. Once he sees a goal, he will go right ahead without consulting the
head office and offers no apologies for his actions.
Das is very calm attentive and prudent but equally decisive too, after wide
Having surveyed Das’ situation, I can safely assert that Das’ career options
are many. He could choose to remain in RHL, or rejoin RVI and indeed go
in to writing. Furthermore, he could also take up a political career as he has a
heart for mother India as well as his strong benevolent pulse – In my view, I
see a great leader in Das, slowly but surely budding and will soon blossom at
noonday. His vision, strategic eye and focus merit out emulation.
International Business Billy C Sichone 159
Asahi Breweries, Ltd
In 1949 when Dai Nippon broke up, it signalled a new era for the brewery
industry in Japan in that the once dominating giant snapped into two
regional companies, Asahi in the west and Sapporo in the east. This
breakage, seemingly insignificant at the time, was a landmark because it was
perfect fertile ground for the Kirin company, once an under dog, to flourish
as it remained the only national player worth its salt.
The ensuing months and years saw Kirin emerge from oblivion to become a
major player. This was because the dismantled Nippon became regional and
thus the two companies had to start all over again establishing them selves as
separate entities. This is the most difficult part in brand establishment.
Further more, Kirin was strategic in its approach as “it read the times”, and
moved with the trends in terms of marketing and customer approach. For
another reason, the Kirin brand was better placed and tasted better given the
contemporary scene. Kirin’s brand was of superb quality, which quality
propelled Kirin to the top of the market. Product loyalty naturally followed.
In the third place, the lean companies also contributed further to this
battering as they made certain serious blunders. For example, Asahi made
two near fatal mistakes by firstly, allowing its distributors be used by
another company-Suntory. This led to a situation where the Asahi brand
being laid aside in favour of the other brand. The second mistake was their
continued focus on a stagnant market. Over the years the market tastes and
preferences had been changing while the company remained insensitive,
neither customer focused nor strategic in approach. Rivals went ahead and
made strides towards meeting customer desires by changing products,
packaging, new aggressive marketing methods and market/product research.
These innovations were taking place on the same customers, though in a
different generation. In short, the market remained stagnant while the Asahi
market share slipped from minor to insignificant. As the years rolled on, it
was a matter of time, Asahi was on the on the way to the company abattoir.
This gloomy picture thus far painted persisted for a years, all the while
loudly proclaiming the imminent Asahi demise. But just at the brink of death
that is when things turned right round. Asahi, under new management, made
radical decisions which begun to steer the old ship back to safety again. The
process was initially slow but certain. Fatally wounded, the organisation
needed drastic surgery to put it back on the rails. The Higuchi led
management embarked on a number of modern “Life saving measures” as
follows. Firstly, the company carried out a self-audit to find out the root
causes for the decline. It was discovered that the company did not have a
International Business Billy C Sichone 160
specific goal or corporate strategy. This goal needs to be an internalised
passion in every employee. Granted, a company can do all the frantic
maneuvers under the sun but without a strategy, all these efforts are wasted,
if in the wrong direction. In a nutshell, there was need to do a corporate
identity, to trace clearly where the company had been, where it was and
where it was going. In what industry was it and what were the competitors
like? In addition to writing a mission statement, these were some of the
questions that Asahi tackled before it begun to shake off the death shackles
that had stuck to the company “good will” like algae. This pivotal self-
introspection and retrospection was crucial in the turn around. The findings
were that there was a lot of bureaucracy, inflexibility, low morale, distrust,
evil suspicions and neither initiative nor risk was allowed. The “naked
King” syndrome rested securely on the company’s laps. Having established
the pit falls, the company then went on to check the attitude towards
customers as well as the corporate agility. It was noted that Asahi had stuck
to the old traditional tastes, values and attitudes that had become obsolete.
The beer taste for example had changed and needed to be revisited.
Furthermore, the company had not moved with the times to ensure that it
was a learning organisation, forever sensing the rapid taste changes in the
environment. Although the traditional brand name and logo were important,
it was time to change these to fit the contemporary tastes. The company
made frantic efforts to conduct frequent market research so that the company
remained “on line” with trends. Also, the packaging and top quality products
had to be changed. In the end, the customer was king who called the “shots”.
Having implemented all these strategies, the giant begun to show some signs
of life again! Asahi begun to flex its muscles once more and moved to
reclaim some of the lost market. As such, the Asahi market share grew from
10% to 29%! This, by all standards is a feat! It was wrought by a new
strategy establishing a niche, which even the rivals found difficult to copy.
Thanks to the corporate identity and Total quality control exercises!
Now the above “success story” seems to suggest that Asahi has arrived
forever, nothing could be further from the truth! The fact that it has begun to
expand sales means more work, watchfulness, and always reading the times.
Quality must continue to be at the heart of the products. The customer must
set the pace and innovative aggressive marketing should continue. In our
view, Higuchi must increase company capacity, while remaining
contemporary to meet customer demands. Further innovations and brands
must be launched knowing that rivals are busy etching inroads into the beer
market through new products, still believing that the Asahi brand was a mere
International Business Billy C Sichone 161
improvement to Kirin brand. In addition, product differentiation is crucial
now more than ever before.
Although the future for Asahi seems threatened, we have reason to be
confident that given the new management style and the continued efforts to
ensure a competitively strategic position, we have no fear that Asahi will be
numbered among great revived giants, if not the greatest!
International Business Billy C Sichone 162
Ben and Jerry’s Homemade Ice Cream Inc:
Keeping the mission(s) alive
If one has heard of the Body shop’s strong social change goal, then, the Ben
and Jerry’s Homemade Ice cream Inc. will be a good reminder. The
company was incorporated a partnership comprising two long time friends,
Ben Cohen and Jerry Greenfield in 1977. It was an immediate success and
has advanced to be a powerful No.2 on the ice cream market (as at 1990).
The success story is attributed to a number of factors, which we endeavour
From the outset, the founders did not design the company primarily for
profit making but rather with a strong thrust towards social change. Their
aim was to bring about as much Community change and thus their policies
and values thus far has been directed towards that goal. Since we know that
the destiny of any entity is not entirely in our hands, the Ice cream business
blossomed and has been moving from strength to strength as more
consumers get captivated by the delicious multiple flavours on offer. The
Company rests on very strong principles that are worth noting. Firstly, the
company has a strong belief that the yawning earnings gap between the top
executives and a new entrant is immoral. This is a sad but common
phenomenon in America, and as such, the company has endeavoured to
minimise the discrepancy by imbibing a “5 to 1” wage condition. This
means that the highest paid employee does not get more than five times the
lowest paid, thus minimising the disparity. Secondly, the company has from
the beginning emphasised quality and timeliness of service. By this, the
company endeavours to continuously improve its Ice cream quality, flavour
and packaging while in the same breathe ensuring that the customer is
treated as king, with maximum satisfaction. As such, all the employees take
it as priority to serve the customer first and also keep true to their word.
Thirdly, this high quality and speedy service hallmark has turbid the
company to a strong unique position where all other imitators find difficult
to copy. Further more, the strong social change outlook of the company
marks it further from the rest. In a nutshell then, the company has beaten out
a clear path all these years having upheld its social obligations as well as the
internal ethics such as the “5-1” wage condition as a beacon. In this two fold
thrust, the company has prided itself.
Having laboured to show that the company built by the duo is very strong,
we hasten to say that not all has been rosy lately. Like any other growing
International Business Billy C Sichone 163
company, the entity has been encountering hurdles. The first has been that as
more people have been hired over time, not every one espouses the ancient
core values. Since the company is now more complex, profit making and
possesses a powerful presence on the market, the new employees possibly
do not whole-heartedly imbibe the values. While some appreciate the said
values, others question their relevance and usefulness. Secondly, many,
including the out going CEO, Chico Lager, feel that the company must
throw off some “obsolete” relics which tie down the company and impede
further development. They argue that the company is past the napkin stage
and must modernise some values, especially the “5-1” wage condition. They
(opponents) argue that the company can neither retain nor attract
professionals due to the unattractive pay and compensation. Why should one
sacrifice a better wage for a lesser paying job where one is even over
worked? Thirdly, the “5-1” condition opponents further argue that the
company is in a competitive environment where only the best must be hired
or else the company sinks. From these views, we can clearly see that the
company was divided into two camps, one with Cohen (adherent to) and
Lager (opposer of) on the other. This was the turbulent atmosphere in the
company that Chuck lacey was soon to take over in the ensuing few months
following the September 1990 final decision making meeting. His interest
lay in the fact that he was the one to steer the ship henceforth. As such, he
had to be most objective and not appear partisan.
But does that mean all the “obsolete” values of the past have been overly
and pointlessly imposed? Nothing could be further from the truth! To the
contrary, these values are the ones that have won battles for Ben & Jerry all
these years. For instance, the company has been powerful and competitive
from the beginning because of its unique social change policies. By that
token, some people have been buying and popularising their products. We
must go further to assert that the non profit ethic in those earlier days was
excellent in that the employees knew fully well that theirs was more of a
service than a wealth amassing venture. Thus, this has meant less pay, fewer
over head costs and lower price but high quality products to the customer.
The consumers have not only been continuously satisfied but have also felt
they were contributing to a worthy cause. But like they say, “what goes up
must come down”, Ben & Jerry’s Inc’s weapons of yesterday are blunt and
must constantly be revised ensuring that they remain current and
strategically relevant. This may mean modifying some traditions or
discarding some practices as the case may be. The difficulty with the present
crisis at Ben & Jerry is that the points of contention lie at the very heart of
the company, without which, one of its distinctives will be lost. This will
International Business Billy C Sichone 164
weaken the company “punch” and become like the rest. In our view, Chuck
Lacey must approach this scenario very cautiously, taking to heart the pros
and cons. He must be seen to be objective, though forward looking. If it
means changing the points of contention, the reasons must be fully furnished
and the history books re-written. If the present status quo is maintained, then
alternative ways must be found which will attract and retain staff because a
high employee turn over in itself reflects badly on the company.
In a nutshell, Chuck lacey must be objective, strategic and wise. When the
decision is made, he must be ready to go full throttle in implementing the
decisions, all the time keeping an eye on the market. A divided house is a
sure recipe for disaster but also, we must acknowledge that change is
resisted at all costs, especially if it impinges on time honoured hallmark
values. That not with standing, we are confident that the Ben & Jerry will
surmount all these hurdles with agility and hurtle towards a brighter
Bower et al, Business Policy
International Business Billy C Sichone 165
0IwertItø Iø tbe werb pIoce
With the rapid re-engineering that has been sweeping across the world’s
businesses, one hardly finds it difficult to stumble across literature that deals
with the said changes. The media is also replete with reports of company
reorganizations every day. Indeed, these inevitable changes are sweeping
across the world like a typhoon and there seems to be no panacea to this
traumatic tide. What is really happening? Why this seemingly mindless
closure of companies and the shift towards diverse corporate companies?
These and many other questions, the Organisational Behaviour course seeks
to unveil. One aspect dealt with is that of nurturing and maintaining a
diverse workforce in this competitive environment. But why should we
bother ourselves with diversity? Why the countless studies?
An article by two excellent authors, Caela Farren and Bob Nelson entitled
“Retaining Diversity” is a brisk but clear article that high lights the necessity
of a diverse work force and how to retain the same. The said article opens by
stating that although recruiting a diverse workforce can be challenging,
retaining the same is even more dicey. Reading the article further reveals
four best practice methods to be imbibed so as to minimise the employee
turnover. The retaining of a diverse workforce is crucial because of the
obvious advantages that accrue to the company. Firstly, people from
different backgrounds and races come up with different ways of carrying out
a procedure as well as new and cheaper ways of producing a product.
Closely akin to the first reason is the fact that a rich diverse company will
help the multinational corporation to sail more easily on “foreign waters”-
markets because valuable insights and connections are within the corporate
ranks. Thirdly, in keeping with the affirmative action, where minorities are
given an equal chance of employment, advancement will ultimately bring
about more production and harmony. Hitherto, the top jobs have been the
private preserves of a few elite men. In the past, women and people of
colour have been relegated to the terraces. With the aforementioned culture,
a company risks missing out on excellent the contributions from the said
minorities. As such the article furnishes us with four ways to best retain the
diversity in the company.
In the first place, open communication is highlighted, and rightly so.
Communication is crucial if any institution is to survive in any circumstance.
Even marriage, to a greater extent, hinges on effective communication. By
this is meant that every one has a right to information at the right time and
must keep abreast with the current happenings within the firm. This entails
International Business Billy C Sichone 166
talking over issues, having access to the top executives and liberty to suggest
innovations. Every one, despite their colour, sex and creed must have a fair
hearing. For example, at Pacific Enterprises, one or two top ranking
employees sit before an audience and describe how they moved through the
corporate ranks. This offers tremendous encouragement to those beginning
the corporate ladder ascent. Berlinda Fontenot-Jamerson, who heads the
Pacific Enterprise Diversity Program and is herself an African American
woman, testifies to the usefulness of this approach.
The second suggested best practice is that of training and education. All
employees must be given some form of training to sensitise them of the
potential dangers of discrimination and also about other cultures. Gross
ignorance accounts for some of the discriminatory attitudes such as
ethnocentrism where one feels their colour, sex and race are superior to
others. Thus, the training and education will go a long way to clear defective
stereotypes and prejudices. Furthermore, all staff must be given similar
opportunities and leeway to express themself. At Microsoft for example, two
programs are in place to tackle the diversity issue. The first is an awareness
program designed to limit the influence of stereotypes while the second is a
“business program to provide real-life situations, challenges, and solutions to
. In addition to the aforementioned training, the companies
should embark on staff career development that will make them self reliant,
thus building capacity.
The third best practice method is that of deliberately providing mentors to
new employees. The said mentor should be attached to a new team member
and should meet at regular intervals to exchange notes on the progress. A
period of one year is recommended. In this way, the new people will feel
welcome and not lost. Digital Equipment has reduced minority turnover as a
result of the mentor program introduced into the company. The idea of
mentors was nearly a forgotten art until the world woke up a few years ago.
Most of the world’s great personalities have had mentors to whom they
looked for inspiration, much like the ‘management gurus’ we read about in
The fourth and last best practice is to make managers accountable. Far too
many pay lip service to the importance of diversity than they practice. Once
given a platform to present a paper, they give heart rending, tear evoking and
moving speeches but as soon as they turn round to leave, they discard
Retaining Diversity, Excellence magazine-May 1999 issue page 7
International Business Billy C Sichone 167
everything! There is need to put parameters in place to ensure that minorities
are not only represented but are appreciated, as Roosevelt Thomas, Jr.
would advocate. Top management must be seen to tangibly and
pragmatically support the diversity program. We learn many valuable
lessons from each other and ultimately the organisation benefits once the
right attitudes are internalised into the company culture.
Having outlined the best methods, the article hurtles to give some guidelines
for a strong foundation. To build a powerful superstructure, there is need to
foster understanding on key concepts, address all representation and
diversity issues regularly. With these and other practices such as cultivating
team spirit, mutual trust, effective communication, we have no reason to
believe that a company will continue crawling in the dust of competitive
Executive Excellence 1999
Diversity management, Excellence magazine-May 1999 issue page 8
International Business Billy C Sichone 168
A response to Larry Diamond's “Debt for Democracy”
Reading Larry Diamond’s “Debt or Democracy” article evoked a lot of sad emotions
and thoughts. Many scenarios flushed through my mind as I read the article, point after
point. I could not help but agree with him on most of the points save a few. In principle, I
heartily support the views advanced in the said article.
By and large the article was well written, researched, argued, largely consistent with deep
insight summoned to potently present the issues at hand. For instance, his introductory
paragraph could not have been written any better than he has. It presents an accurate
summary of what obtains on the ground here in third world Africa where the politician
has taken over the scenario and recklessly ruins every thing at the cost of the powerless
poor and disadvantaged. Indeed, wantonness is the modern clown Politicians’ trade mark.
The crippling external and unsustainable debt levels, absence of social amenities and
services, near homogeneous abject poverty, shortened life expectancy and the ravaging
effects of the HIV/AIDS pandemic among other things are well analyzed. This and many
other aspects of the article are simply superb and I wish he had written more than he has.
I wish however to comment on some of the sweeping statements and remedial
propositions he advanced regarding the mode and conditions of debt cancellation for the
corruption ridden third world nations.
First and foremost, it is important to note that not all the pauper countries are as corrupt
as portrayed in the said article. Some are as clean as any other nation can ever be, perhaps
even better than some of the purportedly developed countries of the world. While it is
true to say that most are corrupt, not all are. I wish there fore to raise my finger in protest
over that assertion.
Secondly, Mr. Diamond makes another assertion that there is “global prosperity” I
thought that statement was not entirely accurate unless he was using it as a figure of
speech or referring to the affluent society primarily. That not with standing, It is probable
that he meant that the first world by and large is technologically advanced and able to
generate much more than ever to the extent that it is inconceivable to stumble across
extremely poor nations in this global village. If that is he meant, then I have no quarrel,
but if he meant that the whole world is in prosperity, I beg to differ. That may imply that
every country on this terrestrial ball is in a measure as advanced with all their resources
and potentials fully harnessed. I tend to think that the statement is far too wide and
relative. Care must be taken so that our Self Reference Criterion (SRC)
influence our perception. Objectivity must reign at all times. From my stand point, I tend
to think the affluent societies have historically significantly contributed to the vices (e.g.
corruption, dependence syndrome, indifference, power jostling etc) we see today. For one
SRC has to do with our world view and how we interpret things. Usually this is influenced by many
things such as up bringing, training and exposure.
International Business Billy C Sichone 169
thing, they disturbed the once harmonious social fiber when they brought their own
definition of governance and development. No wonder, very few countries have pulled
out of the poverty quagmire!
Further more, one gets the gut feeling that the pauper countries are used as guinea pigs to
test various economic theories thrown around over the corridors of time. With all due
regard, the IMF and World bank seem to be at the fore front of this. How can a nation
develop with over 5 development plans being pursued simultaneously? The developed
world must also own up in some of their past follies.
Thirdly, the article at hand places the root cause of the problem as a purely political one. I
understood him to mean that the unjust systems and weak mechanisms thus far instituted
in the said countries do not address or have the capacity to guarantee proper
administration of justice, fair play and focus in a country. I agree with that but what I
would like to add is that the root cause really lies with the respective natives of the
countries at hand. My diagnosis is that the third world citizens by and large suffer from a
naïve ATTITUDE problem that makes them laissez faire, complacent, indifferent to the
point of docility and generally laid back while their wealth and tax money is misapplied.
The tax payer is often too busy toiling trying to make ends meet while the appointed
authority is busy siphoning the wealth or lavishly spending it on egocentric politically
motivated worthless issues. The corrupt leaders
really ensure they nearly over draw on
the patience account of the led to the extent that they get away with it without leaving any
finger prints behind them after they have left office. The immediate solution to this defect
is sensitization (i.e. activating/ charging/ awareness rather than “pumping sense into their
damn heads!” which the word “sensitization” seems to suggest at first sight) on a massive
level scaling up what some NGOs are already doing. In Zambia, the Women for Change
is one such potent NGO that has contributed greatly to this noble agenda.
Fourthly and closely connected to the point above, most of these poor countries still
harbour archaic constitutions that are oppressive and herald the President as a “know it
all” super person. What these so called leaders do when they get into power is to defend
the defective constitution as much as possible so that they prolong their hold on power.
For instance, in Zambia, the government has tenaciously held on to the ancient defective
constitution so that they can easily surmount the next elections slated for 2006. Basically,
the said Zambian constitution is based on the obsolete autocratic system where the Chief
assumed all powers regardless. What he or she said was unquestionable law. Similarly,
the President is addressed as “Your Excellency” meaning that that they are infallible and
neither can they be queried on anything, what a fallacy! By that token, they can commit
some heinous crimes and still escape unscathed due to the immunity embedded in the
law. The President has powers to decree anything, sometimes ultra vires, after all, the
separation of powers between the judiciary, legislature and executive are merely on
paper. As such, the President can prevail over court decisions leaving no room for contra
opinions to be given an objective hearing. Thus, it boils down to attitude because if
people had the right attitude and were aware of the cracks of the matter, they would have
long dealt with the constitution issue ages ago.
Note that not all leaders are corrupt. I used this blanket statement for convenience and specifically for the
International Business Billy C Sichone 170
Fifthly, apart from the citizens’ slothfully indifferent attitude is the scarcity of leaders
equal to the task. It is true to say as Mr. Diamond rightly pointed out that plans are
worthless without implementation. I heartily agree and would add that there is a serious
dearth of nationalistic, patriotic leaders that will sincerely, resiliently, diligently and
unreservedly give themselves to the task of implementing the agreed remedial strategies.
Gone are the days when people assumed political office to solely contribute to the
national development. Today, in poor third world nations, people generally jump on the
political band wagon to alleviate poverty on themselves rather than the nation! As the
excruciating poverty levels demand immediate relief before talking about sustainable
development, the cunning politicians take advantage, appear on the scene, lavish
temporal goodies and slickly buy the vote to Parliament and then desert the electorate for
five years. I tend to think that leaving people to wallow in abject poverty is a strategic
political ploy so that people remain perpetually dependant and vulnerable to
manipulation. Further, these politicians know too well that they cannot be summoned
from Parliament until the five year tenure is over. Perhaps a decentralized system would
be better where the Member of Parliament, and indeed the President, is held accountable
directly to the electorate. In keeping with the proposed electoral reforms implied in Mr.
Diamond’s article, the electorate must be empowered to recall some one from office and
debug them after a case is established against them. In a nutshell, highly indebted
countries have the wrong people running the show who have no iota of fidelity or
patriotism to their country except enriching themselves and along side their clandestine
allies around them.
Sixthly, poor countries are infested with short term thinkers that only look at issues
subjectively and conveniently. They masquerade as excellent planners but deliberately
fail to implement, choosing only what will suite them. If any thing threatens their hold on
power, they quickly adjust as via an emergent strategy that never appears when it has to
do with good national issues. Having been around for some time now, I have observed
that the short term mind set is effectively at work where people deliberately refuse to see
what may befall the nation in the near future but choose to bag an extra coin! This is an
extremely costly way to run a country. The nations need more than mere planners but
implementers equal to the task. These strategies must be shared with the donors who
should track every move along the way, depending on the government in question, for
In the seventh place, the countries at hand should ensure that proper mechanisms are put
in place that will ensure that the now endemic corruption is systematically, consistently
and effectively eradicated or reduced in a given country. In the case of Zambia for
instance, the corruption fight appears to be a mere smoke screen because no tangible
mechanisms exist to independently sustain the corruption fight, neither are there extant
law enforcement agencies free from external political interference. There is mere
rhetorical talk rather than action. Sadly, this talk is equated to commitment to the fight by
the donor community who naively buy into the meticulously crafted political ploy. In
International Business Billy C Sichone 171
such a scenario, we are bound to see many lost cases
, selective prosecution, political
interference, suspicious acquittals of clear criminals, senseless nolle prosequis and an
increase in corruption sophistry. What has been observed in Zambia is that corruption is
more sophisticated and systemic than before. There is less clear cut public corruption but
the silent subterranean filthy stream runs deep with no audit trail for the present tools to
detect. People are smart enough to know where the live wire cable passes.
Eighthly, I wish to agree in part about the recommendation for the donor agencies to
demand democracy for aid or debt relief but I wish to add further that the top down
arrangement should be revisited. What tends to happen is that the said countries may
observe the conditionalities but the quality of work output on the ground remains
questionable, in many instances far below standard due to the hustle and bustle about
targets and deadlines. A case in point is the USAID run programs. Most of these are high
profile, well meant but fall short in that they tend to emphasize numbers rather than
quality. This means that the top down approach is bossy and does not encourage owning
of the goal by the stakeholders who break their backs to meet the requirements. I would
therefore recommend that the relevant donor agencies critically look into the matter and
ensure that quality is in built within the system where both the implementing partners and
other stakeholders internalize the essence of quality programming. As at now, it remains
a far fetched wish.
In the ninth place, I have serious reservations advocating for the United States being the
watch dog over other countries’ human rights record. I say this because I see glaring
inconsistencies in the USA. Examples abound which show a questionable record and
motives by the USA. One example is the Iraq fiasco where the USA, in the pretext of
promoting democracy is after the regions’ oil reserves. USA must first remove the log in
its eyes before it spots the speck in the other’s eye. Granted, the nation (USA) has the
financial muscle and is probably the foremost super power of the day, but it is none the
less subject to the same parameters that measure the human rights record. The American
pride is simply amazingly blinding! I recommend that we use a more neutral country as
an ideal example not the United States.
Tenthly, Mr. Diamond seems to assume that once the pauper governments are pressurized
to bow to donor demands, the respective citizens will rise in uproar as a result. This is an
unverifiable assumption as it does not apply universally. Granted, there will certainly be
some internal upheavals but not always to the extent suggested. Further, the people that
are hurt the most are the common people on the ground. The governments the donors
target to destabilize will for a long time ignore the top down decrees and simply pass on
the buck to the hapless ordinary people who ultimately bear the brunt. In the process,
myriads perish while the survivors are reduced to less than the scum of the earth.
In the last place under observations, I tend to have problems with the definition of the
term “National security” as proposed by Mr. Diamond. Methinks it is a cover up for evil
by the bully nations. The USA has in the past abused this term to justify its crimes against
In Zambia, we have observed an increase in the court gymnastics where the amount spent on court witch
hunting costs more than what was actually stolen, its just a circus out here!
International Business Billy C Sichone 172
humanity. If it is used objectively properly and meant to the further universal freedoms,
then I have no quarrel with Mr. Diamond’s recommendation. Same goes for the NGO
world at large whose agenda we often question.
What then is the way forward? I simply wish to strongly advise that a new workable and
sustainable mechanism be devised to refine the present systems. Further, I wish to advise
that the egocentric interests of the USA be checked by other equally potent nations. In the
post cold war era, the USA is having a field day harassing all and sundry in the name of
fostering freedom and “national security”. The present trend must be reversed if we are to
see a changed world. Further, the United Nations also needs to be liberated from the firm
American clutches that have hijacked it. We are aware that many hands are involved in
this global body but we assert that the entity has no teeth to bite the USA because of the
dollar that the latter dangles. Another aspect worth exploring is to scale up on the gender
equity in the less developed nations as that will act as a check and balance measure
within the system. By and large, the female folk are deprived of decision making
prowess, no wonder the AIDS pandemic runs rampage.
Finally, the poor countries desperately need the donor aid cancellation. If that were done
today, that would be the greatest news. Whether it is done piecemeal or in one whole is
immaterial for now, though the piecemeal arrangement is favoured by this author
for Democracy is heralded but modalities questioned.
Thinking outside the box a little, imagine for a moment the whole debt was instantly written off in one
batch rather than piecemeal, there would be chaos in the pauper countries! Most likely, the politicians will
loosen the tight fiscal controls, divert funds and open a Pandora box for theft as there will probably be more
disposable funds. Plunder would ensue once again unless safety gadgets are proactively put in place to
guarantee potent internal controls. Another possibility is that they will use the debt relief as a political
mileage tool to lengthen their hold on the mantle.
International Business Billy C Sichone 173
Bla|al|tat|aa aaá staaáarás
In this global world, the genius will come from any point rather than the renowned
world’s Universities and institutions. Examples abound, for instance the Woman
Commander of the Space shuttle Discovery which soared to the skies (13
after almost 2.5 years after the last catastrophe of Feb 2003 (The Columbia Space shuttle
disintegration on re-entry of the earth’s atmosphere) Eileen Collins, 48, is from some
obscure Syracuse University, USA. Others to be added to this unique list are our own
world class Kalusha Bwalya, Collins Mbesuma, Clive Chirwa, Mutembo Nchito,
Christopher Kangwa, Samuel Matete, Esther Phiri, Amon Simutowe (Chess GM) and a
whole host of other athletes.
It is reported that some of the leading scientists at NASA are from UNZA.
From the foregoing, it is therefore folly to believe that only the World’s elite universities
will produce the all stars team. Take a look at the Real Madrid team. This team, by all
standards is the dream team but look at their dismal performance season after season. I
am convinced it is not a question of capacity as much as pride. After all, they all have
In this global world then, people must learn to think outside the box of course whilst
meticulously maintaining the standards. Like once successful but obsolete strategies,
standards may also stifle initiative, creativity and development of thought. With all due
respect to those upon whose shoulders we now stand, there is an urgent need to
constantly re-examine the changes in the environment. This should be a universal
principle to operate with.
Care however must be taken not to hurl out time tasted principles but the methods and
approaches are the ones that are variable. The same goes for many once popular churches
in Europe that are by and large deserted today. What about the Cinemas, Post offices and
Discos? With the human eye, all these failed to mutate with the times and have thus
remained white elephants. That does not mean in and of themselves these are useless, far
from it! But rather, they needed to read the times, anticipate environmental changes and
proactively position themselves at places where the target populations are.
International Business Billy C Sichone 174
Types oI IntetnatlonaI buslness.post sctlpt.
1. Merchandise exports and imports
2. Service exports and imports
3. Tourism and Transportation
4. Asset use
5. Investments, including direct and portfolio investments,
licensing, concessions and turn key investments, cooperative
6. Multi National Enterprise/Corporation (MNC)
Trends in later nationalization of business: some mega trends
influencing International Business include:
1. Technological renewal (Reinforcing the importance.)
2. The rediscovery of capitalism.
3. The development of the services industry.
4. The development of regional trading blocs
5. Increasing ties between different economics;
6. The fact that the U.S.A is currently the #1 economic force in
7. Increasing competition among the international industries.
8. The unstable international political climate;
9. Changing demographic patterns and the impact of AIDS;
12. Changing value systems
International Business Billy C Sichone 175
Findings reports on ongoing operational, economic and sector work carried out by the
World Bank and its member governments in the Africa Region. It is published
periodically by the Knowledge Networks, Information and Technology Center on behalf
of the Region
Privatization in Africa : the Zambian Example
A recent report on the progress of privatization in Sub-Saharan Africa concludes that the
response to and the results of privatization have been mixed. But the report shows that there is a
success story. Zambia has the most successful privatization program to date and the experience
there offers many examples of best practice ( Commitment is what counts : The Progress of
Privatization in Africa by O. Campbell White and A. Bhatia , in press ).
Like many countries in the region, Zambia embarked on privatization with, among other
objectives, a desire to broaden ownership and develop the capital market. The Securities Act was
enacted on 19 December 1993. It established the Securities and Exchange Commission (SEC) to
regulate all participants in the stock market with the prime purpose of protecting investors. The
Lusaka Stock Exchange began operations in January 1994 and was formally opened for business
on 21 February 1994 after only twelve months of concerted effort on the part of the government,
the private financial sector and World Bank project team. As an integral part of the privatization
program, the Privatization Trust Fund was established in June 1994 to temporarily warehouse
shares which are later to be sold through public flotations.
After what many observers perceived as a slow start, Zambia's program has really taken off over
the twelve months from June 1995 to June 1996. As the following table shows, not only has the
number of concluded deals risen sharply, but ZPA's scope of work has also expanded.
International Business Billy C Sichone 176
The 97 deals concluded to end June 1996 have been worth some $119 million in divestiture
International Business Billy C Sichone 177
Factors for success
What are the measures and the reasons for the success of Zambia's program? The report uses 8
indicators for assessing the performance of divestiture programs in Africa. These are: the extent
of divestiture (i.e. government's willingness to exit totally from equity ownership of enterprises),
fiscal impact, the efforts made and achievement in broadening ownership, the level of foreign
direct investment attracted, enterprise post-privatization performance, the depth and quality of
program design and management, transparency and government commitment. Zambia rates
medium to high on all 8 indicators.
International Business Billy C Sichone 178
Government commitment is both a measure of and the most important factor in the success of
Zambia's program. Commitment is what gave prominence to the private sector's role in the
process and is reflected in :
• the resources invested in careful program design and preparation,
• appropriate legislation (the Privatization Act),
• the legal authority vested in ZPA which enables it to undertake its work with
minimum political interference,
• transparency- the steps taken to inform the public about the program and to
encourage maximum Zambian participation in the process, and
• the decisive steps to deal with constraints, notably by addressing the weak capital
market and eliminating the influence of holding companies.
Zambia's program is managed by the Zambia Privatization Agency (ZPA). A noteworthy feature -
and one of the key factors in the program's success - is the involvement of the private sector in
the management and oversight of the divestiture process. This takes two forms. First, ZPA is
private sector-led. It has a board of 12 directors but only 3 are appointed by the government. Nine
of the directors are selected by representative private sector groups such as the Zambia
Confederation of Chambers of Commerce and Industry, the Zambia Congress of Trade Unions,
the Zambia Federation of Employers, the Law Association of Zambia, the Zambia Institute of
Certified Accountants and the Bankers Association of Zambia. ZPA's chief executive, recruited
and appointed by the ZPA Board, is also from the private sector. Second, much of the
preparatory work is contracted out to professional firms and all negotiations with bidders are
conducted by small teams of professionally qualified individuals selected for each transaction. In
this way, not only is the private sector heavily involved, the government is twice removed from
Through ZPA's professional approach (the Bank project team's field work in Zambia last year
revealed not a single complaint about lack of transparency) and the results it has achieved, the
government has had the confidence to broaden the Agency's scope of work to include all
parastatals. Hence, ZPA is now responsible for handling the privatization of the major utilities and
Zambia's largest public enterprise, Zambia Consolidated Copper Mines Limited. In no other
country in the Africa region has a government had the confidence to place complete responsibility
for privatization in the hands of one entity.
Finally, donors, including the Bank, have played an important role too in the success of Zambia's
program. Their level of support has been greater than in any other country in the region and that
support has been very well coordinated. Donor cooperation and coordination in support of
privatization also provides a good example for other countries in the region.
Correcting negative public perceptions
However, the program has not been without its problems. The major state holding company
(ZIMCO) was a source of hindrance until its closure in March 1995. Several major public
enterprises, including the United Bus Company and Zambia Airways, were put into liquidation in
late 1994/early 1995 and ZPA was, shortly after, made responsible for overseeing those
liquidations. In the minds of many ordinary people, "privatization" became synonymous with
"liquidation". ZPA has had to work hard to correct that popular misconception. Also, because of
its fragile economic situation, Zambia was not readily attractive to foreign investors. However,
multinational companies who have invested in Zambia are impressed with the way the program is
being managed. As a result, the country is now one of the most attractive in Africa to investors.
International Business Billy C Sichone 179
For further information on Zambia's privatization program contact Emile Sawaya, Tel. no.:(202)
4732612; for information on privatization in general in Africa and on the recent report on the
privatization study findings, contact Oliver Campbell White, Tel. no. (202) 4737952 or Anita
Bhatia, Tel. no. (202) 4734294. Internet enquiries to firstname.lastname@example.org
Down but not out!
Much dust and speculation has surrounded the unceremonious departure of
Boutros Ghali, that great Egyptian, from the United Nations Secretariat
office at the end of 1996. Whatever the case, his ordeal has been one worth
picking a few lessons from so that we are not caught napping by recurrent
As earlier intimated, Ghali was hounded out of office having accomplished
much though his illustrious career has been deliberately marred by his
critics. Who is Boutros Boutros Ghali, if we care to ask? What did he do or
not do that caused him to appear a dismal failure at that top job?
For one thing, we do not have much information about him from the article
“Why Boutros fell from grace”, which appeared in the magazine “New
African” of October 1999. The said article is more focused on what
happened at the UN secretariat rather than his genealogy or profile. It deals
with the causes that led to Ghali’s ouster and replacement by Koffi Annan
from Ghana. For all we know, Ghali is an Egyptian and seems to have
worked tirelessly at the UN for many years before he was elected into office
in 1991. He is a highly principled man and possesses all the traits of a great
statesman and not easily shaken off his principles. Also, he seems to posses
a very crystal clear mind that is both strategic and objectively analytical as
evidenced by his seasoned comments.
He stepped into the UN offices shortly after election with a burning passion
to restructure the UN into a more agile and relevant organisation, in keeping
with the original San Francisco goals of 1945. As we know, the UN ideally
is there to preserve World peace, prevent wars, alleviate poverty, improve
global health, and fight exploitative labour practices as well as resolve
regional conflicts. This is achieved through many interventions, such as
negotiations with Governments and using its own military force, derived
from the UN member countries to quell crimes against humanity. When the
International Business Billy C Sichone 180
World body commenced its work many decades ago, all these goals were
very fresh and justified the existence of the said body. But alas, with time, it
has turned out to be a US tool to advance America’s global dominance
political agenda under the guise of being a “world peace watch dog”, when
the UN is supposed to be independent and objective, detached from any
single Government manipulation. The advent of the cold war made the UN
further lose its sovereign identity and to this day, it still is firmly clutched in
US hands. This is what Ghali set out to change, and as it were, touched an
American “naked live wire” instantly electrocuting himself!
But then, the man was prompted to institute these drastic manoeuvres
because of the organisational state of the outwardly sparkling entity. When
Ghali took over the mantle, he found a desperately weak entity literary
struggling to keep alive. What were the root causes, one may be prompted to
For a long time, the UN has been owed billions of dollars in unpaid
subscriptions by member countries, chiefest of whom is the USA. As a
result, the world body has operationally been crippled. The only way to get
round this hurdle is to restructure, cut down on staff, limit travels and initiate
controls on the use of resources. Therefore, when Ghali stepped into office,
his keen eagle’s eye diagnosed the problem and immediately prescribed a
remedy, but ironically, the proposed solutions greatly infuriated some power
mongers. These were but the first straws that lashed out at the US
Government and from then on, he was a marked man. Further more, he
begun to advocate objectivity and fairness in treating conflicts around the
world. What was evident was that the US could pick and choose at will
whom to help, when and where. Hitherto, no one had dared question such
hypocrisy but when Ghali raised his finger in protest, further irking some
quarters. But what exactly was the problem root cause?
As earlier intimated, Ghali was firmly convinced that the UN was
unnecessarily too huge, complex and unresponsive, and as such, he sought to
awaken the world about the need to restructure so that the UN be
transformed into an agile, fluid, relevant, responsive and environmentally
conscious body. The operations of yester years were obsolete and needed
revisiting. This called for drastic cost cutting measures and the instillation of
greater stewardship of resources. In a nutshell, this was Boutros’ pulse for
which he fought valiantly to the bitter end, squashed but unvanguished. The
problems really begun at that point of attempting to restructure the UN
towards a meaningful role in a post Cold war era. He wanted the world focus
to shift away from the US to the UN. Having made some initial changes, as
highlighted earlier on, he finally broke the camels’ back when he jokingly
International Business Billy C Sichone 181
remarked after his leave, saying “I am happy to be back here blocking more
reform, flying my black helicopters, imposing global taxes and demoralising
my staff.” Unknowingly, this was a suicidal joke because the same got the
greatest malicious publicity ever. From that point, the US, through that
villain, Madeleine Albright, begun to fire their arsenals at Ghali. They
coaxed him (Ghali) not to go for the second term. After all sinister
persuasions failed, the Americans offered another luxurious job to silence
him but alas, not even money could silence that principled Sphinx, much
like what was said about the Reformer, Martin Luther, when the corrupt
powers of the day exclaimed, “This fool does not even accept gold!” Ghali
too was far above bribes!
In the long run, after much frustration, anger and nausea, the US went full
throttle to oust the man using the vote, simply for not pledging allegiance to
the “finger that fed him”. The Americans campaigned against and voted
Ghali out in 1996, and placed their pawn on the chessboard. It is now many
years after that horrendous episode, we have no telling how plain sailing it
has been for Annan but for all we know, Boutros Ghali fought a good fight
and never forgot mother Africa!
Having analysed the scenario, it now remains for us to draw a few lessons
Firstly, we note that Ghali was probably naïve about many things when he
stepped onto the 38
floor of the UN Secretariat. He assumed too much
thinking all were friends when viper tongued politicians were lurking in the
corridors to strike him!
Secondly, he seems to have been unconcerned about the immediate impact
of his reforms. For all we know, change is always resisted, especially when
it threatens peoples’ status. America is in its declining stages as a world
power, and the kicks of a dying horse can be deadly.
Thirdly, although his reforms and strategies were excellent, it seems to me
that he had worked on the flawless ideas with a small click of friends, to the
exclusion of all others. As such, his ideas appeared to be shoved top-down
rather than participative.
In the fourth place, He seemed to have been in a hurry to implement the
reforms and did not make a proper internal situational analysis of the HQ.
Although he did a good overall operational analysis of the organisation, as
International Business Billy C Sichone 182
evidenced by his apt conclusion that the world body was too bulky and over
weight, it seems he was unaware of “who is who” at HQ. Naïve about UN
organisational politics, he bashed some folks on the head while he spat
others in the face. How they gnashed their teeth! I am one who supports
originality in a leader and would have applauded his brave assertions but it is
more prudent to know your enemy before you act.
Fifthly, organisational reforms take time, especially the complex UN having
tentacles all over the globe. Ghali, should have first looked for ways to curb
the off shoots of the changes by preparing people through training. In
addition, he should have been more careful to motivate his staff in various
ways, such as capacity building and the need for organisational mutation.
As the momentous event recedes into the irretrievable past, we can only
salute Boutros Ghali for the resilience he displayed in attempting to steer the
titanic UN back to sanity. As he himself aptly concludes, “I believe that such
a transformation is still possible and will succeed-if the United States allows
it to do so.” we trust that the petty politics will be surmounted and the
New African, October 1999 issue No. 378
International Business Billy C Sichone 183
About the Author
Billy Sichone trained as an Accountant and worked as a Program Accountant at one of World
Vision Zambia’s large scale Area Development Programs for seven years. He studied the Zambia
Diploma in Accountancy (ZDA), is a Fellow of the Institute of Financial Accountants of the UK,
holds an MBA (Preston University, USA) and is a doctorate candidate.
He is married to Jane and now works as Program Manager at a large scale World Vision Zambia
Among his interests are studies, reading, studying, research, writing, meeting people, astronomy