Geo 1

MSc in Cybersecurity
Geopolitics and Industrial Issues (7KLGEO)
Geopolitics, the battlefield

Class #1
Eric DAVID
September 2022
Contact
Eric DAVID
erdavid@em-lyon.com
office B1040
tel +33 (0) 612041088

Course objectives
 Understand the dynamics of international context,

impacting business in all its aspects, so as to make
decisions, and take associated risks – for this you solve
problems.
 Know how to use your skills to avoid traps in prospective

(lack of rationality, lack of critical thinking, lack of
vision/ attention).
 Apply this to real cases, and learn by investigating.

Overview
CLASS TOPIC
 -
#1 Geopolitics, International Relations, Geoeconomics,
International Trade, CSR, New Frontiers of the XXIst
century, Prospective Tools
#2 Logic of Industry, Industry 4.0, Intelligent Transportation
Systems,Technical and Human Aspects of SCADA,
Safety Tools
#3 Geopolitics of Operations, Geopolitics of Raw Materials
and Energy
#4 Geopolitics of Transportation, Geopolitics of Seas and
Oceans
#5 Geopolitics of Telecommunications, Geopolitics of
Space
#6 Geopolitics of R&D, Innovation and Intellectual Property
Risk, Geopolitics of Education
Assessment/ Groupwork
 25% individual marks from critical readings:

 choose and read a book on a geopolitical topic, summarize it, and
give your critical analysis (of course, you may disagree).
 the deliverable is a word document of 3 to 5 pages.
 25% individual marks from final exam:

 Comment a case.
 50% collective marks from groupwork (groups of 2 or 3

students):
 choose a topic in the series of the four last classes.
 the deliverable is a group presentation during the relevant class.
Food for thought…
PolemoV pantwn men pathr esti.
Ginomena panta kat erin kai crewn.
Heraclitus (~544; ~480)

Food for thought…
孫子 (~544; ~496)
« 兵法 »
Part 1
Basics of
geopolitics
Geopolitics, Int’l Relations, Geoeconomy
 The world can be analysed as a field of power and influence

between actors (states, and many other institutions). Three major
approaches are very useful:
 Geopolitics observes that on the long term, geography is the major factor that
drives political evolution. Geography means: territories, population, natural
resources. It splits into:
 determinism (XIXth/ early XXth century mindset, influenced by military
thinkers: Clausewitz, Ratzel, Mahan, Mackinder, Haushofer, Spykman); based
on strong assumptions (connectedness, permanence of nations/ borders), it
states that whoever may rule a country, his foreign policy cannot vary.
 and « possibilism » (late XXth/ early XXIst century; see Lacoste); it states
that several but not all options are open, and accounts for complex games
involving migrations, non-territorial actors, non-connected influence, etc...
 International Relations (or Studies) focus on interactions, and work at two
levels:
 descriptive: it is a branch of contemporary history;
 or prescriptive: it studies the application of tools (diplomatic negotiations,
sanctions, war, communication campaigns, economic benefits).
 Geoeconomy emphasizes the role of economic agents, and develops topics
related to geographic localization and aggregation (people, corporations, etc…).
Major approaches of international relations
Three main streams:

Relations between Universal community of
Domination of strong ones
independant states people living and trading
on weak ones
defending national interest together
Thucydides, Machiavel, Fichte, Hegel, Marx, Engels, Aristotle, Zeno, Cicero,

Hobbes, Vattel, Hume, Hobson, Hilferding, Lenin, Thomas Aquinas, Vitoria,
Spinoza, Clausewitz Boukharin Grotius, Locke, Rousseau
sovereignty, balance of treaties, legal system,

property, exploitation
power, war international institutions
Realpolitik, cynism, Revolution, propaganda, Liberalism, enlightenment,

threats/violence, anarchy, ideology, world-systems, humanism, globalization,
nationalism, ennemy one-party state democracy
Bismark, Eisenhower/Foster- USSR, China, Cuba, North- Wilson, United Nations,

Dulles, USA, Middle-East Korea European Community
Geopolitics and geoeconomics
▪ Highlights the importance of geography in international

relations:
German school Anglo-saxon school French school Geoeconomics
Ancel, Chéradame,
Mahan, Mackinder,
Ratzel, Haushofer Vidal de la Blache, Luttwak
Spykman
Lacoste, Chauprade
Heartland, coastland, Possibilism, human Possibilism,

Determinism
rimland factors economic factors
Power and conflicts
▪ Sources of power (source Buhler):

1. State – stability, cohesion
2. Law
3. Geography – position, resources
4. Demography
5. Finance – economy
6. Strength – army
7. Science & Technology
8. Influence
Global power index (source Conflits 2018)
80
70
60
50
40
30
20
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l ar co n es ke y
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ite So Sa P K
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DESERVES ATTENTION MAJOR RISK
Haïti Colombia
Crisis
Honduras
Salvador
Nicaragua
Venezuela
Pérou
Brasil
▪ Less stability
Madagascar Burundi
Zimbabwe RDC
Mozambique South Soudan
in « high
Tanzania Soudan
Rwanda République Centrafricaine
Kenya Nigeria
intensity » and
Ouganda Mali
Ethiopie Mauritania
Djibouti Lybia
« low
Erythrea
Egypt
Congo
intensity » Gabon
Cameroon
Togo
zones Benin
Burkina-Faso
Ivory Coast
Liberia
Sierra Leone
Guinea
▪ Example, look Guinea Bissau
Gambia
Senegal
at Ukraine: Algeria
Tunisia
how was it
Ukraine Armenia
Moldavia Azerbaidjan
Kosovo Syria
identified two
Turkey Irak
Lebanon Palestinian territories
Israel Afghanistan
years ago ?
Jordan
Inde
Bangladesh
Maldives
Birmanie
Thaïlande
Philippines
China Sea
Corée du Nord
Map of the world
 -
14
World-systems (« imperialism »)
▪ Geographic position
▪ Center and periphery
▪ Heterogeneity of cultures
▪ Control of logistics
▪ Interaction with neighbouring powers

Heartland, coastland, rimland
▪ The wording was coined by

Mackinder and Spykman.
Originally, it was linked to the
concepts of “pivot” and “world
island”, and explained the
strategy of Russia (access to
“warm seas”). In practice, it can
be applied in many other
circumstances, when a political
power needs to develop its
international logistics
capabilities.
▪ This embodies the concept of
sea-power and land-power,
which underlie two different
trading cultures.
Part 2
Systems of law
Contract
A contract is a legally binding commitment. It provides guidance for:
Executing agreement
Deciding in unexpected situations
Solving conflicts
Writing a contract gives an advantage on the other party (« power of the

pen »). Sometimes a contract simulates an agreement, in order to
manipulate the other party later on.
Except in special cases, a contract is binding only for the parties.
Not everybody has a right to sign a contract on behalf of an enterprise.
A contract is not necessarily written.
Many types of contract: sales, agency, license,…
Beware of responsibilities
Main clauses
1. Foreword > responsibilities

2. Object, validity, due date
3. Contractual documents
4. Confidentiality
5. Deliverable
6. Deadline
7. Acceptance
8. Price
9. Payment conditions
10. Intellectual property
11. Guaranties and bonds
12. Dispute settlement
Domains
Without the ambition of becoming an expert, a buyer
should have a basic knowledge of:
1. Commercial law, Transportation regulation

2. Product liability, Environmental law
3. Criminal law in business
4. Corporate law, Bankruptcy law, Financial
regulation
5. Tax law, Banking law
6. Intellectual property law
7. Competition law, Consumer protection
8. Labor law
9. Insurance Law
10. Public purchasing
BEWARE…
 Sales (ownership, liability, payment)
 Intellectual property and licensing
 Agent and distribution
 Free-competition and anti-trust regulation
 Guarantees and bonds: execution, country, transport, credit,

change
 Insurance. What is insured ?

21
International COMMERCIAL LAW
Country law (common law, roman law, islamic law, chinese law)
+ Lex mercatoria/ Vienna and other conventions/ Communautary

directives
+ Contract : esp. clauses on applicable law, jurisdiction, language (esp.
original documents), disputes settlement (arbitration, judgement, ADR
– time/ confidentiality)
22
Contract
the « war on laws »
Disputes
Dispute settlement in tribunals can be very long:
In Germany: 1 to 4 years
In France or United Kingdom: 5 to 8 years
In the USA: 10 years
In Japan: 15 to 20 years
It is more effective to use an alternative dispute

resolution,
mediation or conciliation
collaborative law
arbitration
International commercial law
Cultural attitudes in front of a contract are different:
• The contract may be rigorously binding, or
relatively contingent (especially in Asia).
• In « low context » countries, contracts must be
detailed, while in « high context » countries, the
contract does not contain all information.
• In « universalist » countries, the contract is
applied to the word, while in « particularist »
countries, its interpretation depends on the
situation.
Knowing this prevents from misunderstandings.

Part 3
Intercultural
aspects
Agenda
 Business situations and communication
 Inputs from human sciences
 Intercultural grids
 Linguistics facts
 Recommendations
27
Purchasing Manager in Technology and Industry
Please comment…
28
Please comment…
29
Thought…
 “Nothing never happens.”
Erwing Goffman
 “One cannot not communicate.”
Palo Alto saying
30
12 box-opening questions
 What do you mean when you say « yes » ?

 How do you translate « I will do it » in Hopi ?
 How do you translate « My name is John » in Huailu ?
 Who is the person sleeping during your meeting in Tokyo ?
 Do you give your business card with one or two hands ?
 Does your Greek supplier mean « yes » or « no » when he nodds his head ?
 Why do German employees shut their doors ?
 Does « mañana » really means « tomorrow » ?
 « From now on, we will do it », « it comes from the fact that we are late », « I
arrived from Istanbul yesterday ». From = from = from ?
 What does « to be on time » mean ?
 Will you touch the arm of an Iraki customer ? of a Mexican customer ? of a Danish
customer ? of a Japanese customer ?
 What happens if you cheer a korean collaborator in front of his colleagues ?
31
Bibliography in English
 The silent language, E. Hall, 1959, Doubleday

 The hidden dimension, E. Hall, 1966, Doubleday
 Beyond culture, E. Hall, 1976, Doubleday
 Pragmatics of human communication, P. Watzlawick, J. Beavin & D. Jackson, 1967, Norton
 Riding the waves of culture, F. Trompenaars, 1998, McGraw-Hill
 The domestication of the savage mind, J. Goody,
 Presentation of self in everyday life, E. Goffman, 1959, Doubleday
 Interaction rituals, E. Goffman, 1967, Doubleday
 Frame analysis, E. Goffman, 1974, Harper & Row
 Relation in public, E. Goffman, 1979, Basic Books
 Management inside our strange world of organizations, H. Mintzberg, 1989, Free Press
 How the mind works, S. Pinker
 The seven intelligences, H. Garner
 Visual thinking, R. Arnheim, 1969, University of California
 Envisioning information, E. Tufte, 1990, Graphic Press
 Culture shock series,
32
Bibliography in French
 Anthropologie structurale, C. Levi-Strauss,

 L’acteur et le système, M. Crozier & E. Friedberg, 1977, Seuil
 La logique de l’honneur, Ph. D’Iribarne, 1989, Seuil
 Sociologie de l’entreprise, Ph. Berdeaux, 2004, Seuil
 Sociologie de l’organisation, Ph. Berdeaux, 2009, Seuil
 Sociologie du changement, Ph. Berdeaux, 2010, Seuil
 Les cinq capitalismes, B. Amable, 2005, Seuil
 Les multinationales chinoises, JP. Larçon, 2010, ESKA
 Grammaire des civilisations, F. Braudel, 1999, Flammarion
 L’invention de l’Europe, E. Todd, 1990, Seuil
 L’origine des systèmes familiaux, E. Todd, Galimard, 2011
33
Professional situations
 Interacting (introducing, small talk, gifts, politeness-precedence, eating out with

business partners, gestures-sight-attitude,…)
 Managing (hiring, terminating a contract, giving orders, do or let do, obeying, checking,
assessing, rewarding, blaming,…)
 Decision making (extrapolating past and forecasting future, assessing, arguing-
convincing, risk taking, planing, deciding, organizing-harmonizing, written laws-
procedures-contracts,…)
 Negotiating, metiV, solving conflicts, competing (winning-losing)
 Working in groups (meeting, facilitating, speaking, sharing space and time, solving
problem, agreeing or disagreeing, criticizing, creativity,…)
 Knowledge: Learning-teaching, explaining-understanding, exchanging experience,
formalizing experience (defining, concepts)
…all of these situations differ from on country to another.

Why ?
34
Communication
 Intercultural issues are communication issues.

…so as to understand intercultural processes, we must study communication processes.
 Communication is an interaction. It follows a scenario (combining sequential and simultaneous

items) including. It may be :
 Cooperative (consensus) / competitive (advantages)
 Formal (status) / informal (no status)
 External (outcome) / internal (feedback)
 Symetrical (discussion, dispute) / complementary (inquiry, negotiation)
 Communication uses both verbal and non-verbal channels.
 Communication involves persons;

 at least 2 persons (inquiry, negotiation, discussion, dispute,…), sometimes 3 (conciliation,
complaint,…), or even more.
 These persons play roles (institutional, semi-institutional, personal)
 These roles may be permanent or occasional.
35
Stereotypes
 Even unconsciously, each communication (interaction) follows a scenario, and people

play expected roles. If you play the role expected by the other party, communication is
efficient. If not, you just create disturbance and frustration.
 The utimate question is to understand how to play the right role. This is true in every
communication interaction.
 In an intercultural situation, you are obviously the « foreigner ». It means that, while you
play your basic communication role, you are « allowed to behave like a foreigner ». In a
certain sense, this gives some degree of freedom. But it also create a more ambiguous
bind.
 Others put us into boxes with labels. They know you come from a given culture, and they
expect you to behave as « a foreigner coming from this specific culture ». This is called
a stereotype. In any case, others will judge us or expect things from us, according to
these stereotypes. We must know them.
36
Big picture
 Many human sciences (and even « hard » sciences) contribute to intercultural

understanding Social
Psychology: Sociology
Psychology: Group
Esp. Cognitive dynamics,
psychology Sociology of
organizations,
etc…
Cognitive INTERCULTURAL Systemics

anthropology STUDIES
Ethnology:
Anthropology esp. Structural
anthropology
Zoology Ethology
Neuro-
sciences Biology
37
Major inputs from human
sciences
 Human sciences, by studying and comparing behaviour of different people, have highlighted many
general (universal ?) facts. Some of them apply even within business relationships, but beware:
they are implemented differently in different cultures.
 Interaction rituals (Goffman): human interactions always follow codified « rituals » (patterns
of process of exchanging words and non-verbal communication, including rules of politeness
and respect of complex social codes). A stranger dosen’t follow exactly the same rules as the
natives, but strangely, is supposed to behave « like a stranger ».
 Gift (Mauss, Levi-Strauss, Godelier): complex rules about exchanging objects always creates
links between people. Economic exchange is just a particular case, and gift is practiced
everywhere, so as to establish confidence and committment.
 Writing (Goody): writing (especially using lists, tables, drawings and formulas) changes deeply
the way people understand the world.
 Linguistics (Sapir-Whorf hypothesis): even if descriptions and explanations of the fact have
been criticized by most theoricians, it seems that using different languages can influence the
way we think. Open point…
 Savage mind (Levi-Strauss): « hot » and « cold » cultures have two opposite approaches of
« history » and « progress ». This gives keys to understand attitude in front of changes and
novelty.
38
Major input from mathematics:
systemics
 Systemics is « the science of systems », which means of complex sets of
elements interacting together in a way that produces stability.
 Developped by J. von Neumann, N. Wiener, L. von Bertalanffy, JL. Le
Moigne
 Links with other disciplines:
 complexity and emergence: Francesco Varela, Edgard Morin,
Gregory Chaitin, Ilya Prigogine
 morphogenesis: D’Arcy Thomson, Yves Bouligand, René Thom,
 Applied to various fields (from machines to economy, from living creatures

to cultures, from brain to enterprises, etc…), this theory provides very
powerful concepts:
 Function, Feedback, Homeostasy, Emergence, Complexity
39
A few insights from psychology
 Social psychology:
 Group dynamics: Kurt Lewin, Didier Anzieu, Michael Balint.
 Jean-Leon Beauvois
 Cognitive psychology:
 Steven Pinker (the programs)
 Howard Gardner (the forms of intelligence)
 Leon Festinger (cognitive dissonance)
 Transactional analysis:
 Erich Berne
40
A key approach:
Palo Alto
 G. Bateson, P. Watzlawick, D. Jackson, E. Hall, E. Goffman
 From ethnology to psychiatry
 Influence of systemics
 Federal Strategic Institute
 Fall-outs: Neuro-Linguistic Programming
 Three major inputs:

 Bateson: zoologist, ethnologist, and psychatrist (schizophrenia)
 Hall: proxemy and chronicity
 Goffman (communication interactions):
 metaphors of theater, of religion, of cinema
 errors correction
41
A few insights from
Anthropology/ Ethnology/ Sociology
 Max Weber (religion)
 Claude Levi-Strauss (structuralism)
 Maurice Godelier (gift)
 Michel Crozier (actors)
 Henry Mintzberg (organizations)
 And the list is unlimited !
42
An open field: learning
 Social « reproduction » (P. Bourdieu), « memes »

(Dawkins), beliefs, tradition,…
 Individual learning, organizational learning,…
 Leads to shared « representations » of the world which

are implicit within one given culture, but seems very odd
to any foreigner.
43
Grids
Overview
 Severall scientists have proposed grids of criteria which allow for identifying and comparing the most
significant features which influence intercultural communication.
 Edward T. Hall
 Kluckhorn and Strodtbeck
 Gert Hofstede
 Fons Trompenaars
 Philippe d’Iribarne
 Emmanuel Todd
 Claude Levi-Strauss
 Jack Goody
 Edward Sapir
 Jared Diamond
 Philippe Descola
 Marcel Bloch
 Paul Virilio
 Catherine Kerbrat-Orecchioni
 you and me ! and others
44
Hall’s grid
 Rich context/ poor context
 Monochrony/ polychrony
 Long/ short distance
45
Kluckhorn and Strodtbeck’s grid
 Relation to nature (subjugation, harmony, domination)
 Relation to time (tradition, situation, goals)
 Relation to actions (person-oriented, task-oriented)
 Relation to others (asymetry, community, independance)
46
Hofstede’s grid
 Distance to power/ proximity
 Control of incertitude/ acceptance of incertitude
 Male/ female
 Individualist/ collectivist
47
Trompenaars’ grid
• Universalism/ particularism
• Individualism/ collectivism
• Neutral/ emotional – (Objectivism/ subjectivism)
• Diffuse/ specific
• Achievement/ ascription – (Statute attributed/ statute acquired)
• Sequential/ synchronic
• Nature control/ nature acceptance – (Internal/ external)
48
D’Iribarne’s grid
 D’Iribarne: what makes people accomplish tasks ? (motivation)
 Honour
 Consensus
 Contract
49
Todd’s grid
What shapes your attitude vis-a-vis authority, cooperation, equality ?
 Authority and territory:

 communautary family
(matri-,patri-, bi-local)
 stem family (matri-,patri-,
bi-local, corresidence)
 nuclear family
(matri-,patri-, bi-local,
corresidence, egalitary,
absolute)
 Marriage and alliance:
 Exogamy vs. endogamy
 Heritage and (un)equality
Complete list: communautaire patrilocal, communautaire matrilocal, communautaire bilocal, souche patrilocal,
souche matrilocal, souche bilocal, souche à corésidence temporaire additionnelle, nucléaire intégré patrilocal,
nucléaire intégré matrilocal, nucléaire intégré bilocal, nucléaire à corésidence temporaire ou à proximité
patrilocal, nucléaire à corésidence temporaire ou à proximité matrilocal, nucléaire à corésidence temporaire ou à
proximité bilocal, nucléaire égalitaire, nucléaire absolu
50
Levi-Strauss’ grid
 How do people consider innovation (and treat innovators) ?
• cold cultures
• warm cultures
51
Goody’s grid
How do you consider a document (report, contract, procedure,…) ? Will you respect
what is written ? How do you balance it with oral information ?
 Attitude towards writing, « graphic reason »:

 Bulk disorder
 Lists
 Tables
 Codes
 Graphs
 Other ?
See also:
Les trois écritures: langue, nombre, code, C. Herrenschmidt, Gallimard, 2007
L’enfer de l’information ordinaire, C. Morel, Gallimard, 2007
52
Sapir’s grid
 do people think differently when they use different languages ? (Sapir-

Whorf hypothesis)
 weak lexical hypothesis : absence of word or classes = absence of
concept ?
 strong grammatical hypothesis : word, sentence and speech
construction = reasoning ?
 further extensions:
 semiotic material (verbal, paraverbal, non-verbal)
 speech turns (gaps and overlaps)
 speech organization
 address
 act of speech (Austin, Searle)
 interaction rituals (Goffman): excuse, compliment, introduction,…
53
Diamond’s grid
How do you behave in the following situations:

• Conflict, violence and justice
• Education
• Contact with elders
• Danger
• Religion
• Language
• Food and health
54
Descola’s grid
 Which ontologic vision of nature ? Our relationships to « other

existing beings » ? How does it influence our way of reasoning, and
especially our sense of « causality and determinism » ?
 Animist
 Totemist
 Analogist
 Naturalist
See also: Der Satz vom Grund. M. Heidegger, Klett-Cotta, 2006 (in
English The Principle of Reason, in French Le Principe de Raison)
55
Virilio’s grid
Do we believe in absolute or relative value of:
• Truth
• Reality
56
Kerbrat-Orecchioni’s grid
 How do we use language ?
 strong speech importance (volubile vs. tacit)
 interpersonal relationship (vertical/ horizontal, consensus/ conflict)
 politeness (positive vs. negative face, positive vs. negative politeness,

individualist vs. solidarist)
 degree of ritualization
57
Bloch’s grid
 How do we see collaboration:
• as a top-down disciplined application of rules ?

• or as a bottom-up emergent property of multiple agents ?
 How do we use:
• Metaphor
• Time
• Memory
 All of this depends on the « Great Human Conversation » (or « swarm

cognition »), i.e. the fact that you think with the ideas of the other persons
who network with you.
58
You and me and others
 Suggestion from the author of the present document: how do people develop autonomy vs.
obedience ? (subject vs object debate)
 Decision making :
 Logical approach: demonstration or examples ?
 Conviction: empirism or rationale ?
 Thinking: visual or auditive ?
 Learning:
 Copying or inventing ?
 Analogy and creativity (see Bloch and Levi-Strauss)
 Information search
 Anti-leadership:
 Attitude towards written documents, orders, hierarchy, authority,…
 Trial and errors, « right to fail »
 Self-assertiveness, autotelicity and resilience
 And some others ? including your own experience ?
59
Linguistics
Learning
 Most positions require fluency in 3 languages.
 Focus on main languages linked with business, except any particular
interest.
 Difficulty span between 3 months and 3 years of intensive learning,

depending on proximity between languages (grammar, vocabulary).
 Easiness is cumulative.
 Survival level: 800 words

 Basic conversation level: 2000 words
 Real fluency: over 3000 words
 Many official certificates
60
Linguistics
Overview
 ~6700 languages in the world
 12 languages spoken by more than 100.000.000 locutors:

 chinese (mandarin), hindi/ urdu, english, spanish, french, arabic, malay/ indonesian, bengali,
portuguese, russian, japanese, german.
 These are the motherly languages of 1/2 of the population of the world, living in 3/4 of
countries, and producing more than 4/5 of world GDP (see chart hereafter).
 12 other important communication languages:

 marathi, farsi, telugu, vietnamese, tagalog, korean, tamil, thai, turk, swahili, amhara, italian
 251 language families (sometimes regrouped in 12 macro-families + isolates):

 khoisan, niger-congo, nilo-saharian, afro-asiatic, indo-european, ouralian, altaic, dravidian,
austric, sino-tibetan, na-dene, amerind
 Learning different languages of the same family is relatively easier than from different
families (can be true of vocabulary, but moreover, of grammar).
61
The “journey of man”
 xxx
62
Language families
 xxx
63
Linguistics
Statistics
 The 12 most widely spoken languages in the world show following quantitative features:
data 2003
Locutors Motherly %GDP Countries Internauts Web pages Publications
Mandarin 1000 885 4% 3 68,4 3,9%
English 1000 341 36% 45 230,6 68,4% 81%
Hindi/ Urdu 900 190 2% 2 0 0,0%
Spanish 450 332 6% 20 47,2 2,4% 1%
Russian 320 170 2% 3 18,4 1,9%
Arabic 250 200 2% 25 5,5 0,1%
Bengali 250 207 0% 0 0 0,0%
Portuguese 200 176 3% 7 19 1,4%
Malay/ Indonesian 160 150 0% 4 8,1 0,0%
Japanese 130 125 14% 1 61,4 5,9%
German 125 100 9% 5 42 5,8% 10%
French 125 77 6% 30 22 3,0% 1%
TOTAL 4910 2953 83% 145 522,6 93% 93%
 These indicators
sources: representwww.ethnologue.com;
www.linguasphere.org; the total number of locutors
funredes; (whether
global reach; cyberatlasmotherly language
or learned
as a second language), the economic importance (number of countries, and relative % in the GDP
of the world), and publications (on the web, in scientific papers).
 All these indicators evolve: more recent data highlight growing importance of Chinese.
64
Observe intercultural facts
 Meier’s list:
 Context:
 Space
 Time
 Relation:
 Introduction
 Formalism
 Gifts
 Behavior
 Meals
 Non-verbal:
 Look
 Emotion
 Silence
 Gestures
65
Learn and show your interest
 Rules and standards, stereotypes
 « Thought » and values
 Institutions
 History, geography, sociology, economy
 Language
 Critical topics: money, family, religion, politics
66
Develop your intercultural skills
 Drummond’s list:
 Curiosity, learning attitude
 Open-mindedness, goodwil
 Sensitivity, contact
 Humility, tolerance, patience
 Psychological stability
67
Train yourself step by step
1. Recognize diversity
2. Make no jugement of value, suspend reactions: epoch/ ataraxia
3. Understand the « reason why » and the « system behind ». Don’t limit
yourself to « do’s and dont’s »: use grids
4. Show respect and humility
5. Develop curiosity and proactivity
68
Part 4
International
trade and
economy
Business and international relations
▪ The activity of enteprises is INTERNATIONAL

embedded in the economic RELATIONS
system:
▪ Micro-economy – actor’s INTERNATIONAL
level ECONOMY
▪ Macro-economy –
political level
▪ International economy – COUNTRIES
world level
ENTERPRISES,
▪ On its turn, the economic
PEOPLE, ETC
system depends (directly or
indirectly) on the
international relations
Thought…
 “Out of intense complexities, intense simplicities
emerge.”
Sir Winston Churchill
71
12 box-opening questions
 What is the GDP of the world ?

 Who are the members of G20 ?
 When money was invented ?
 Which country is the biggest exporter ?
 What happens if customs duties decrease ?
 Which factors increase a currency exchange rate ?
 Which proportion of production is exported ?
 Which are the risks factors when dealing with another country ?
 Which free trade zones do you know ?
 What is the difference between GATT and WTO ?
 Will Russia join Europe or Asia ?
 What are the differences between anglo-saxon and continental capitalism ?
72
Bibliography in English
 International Economics: Theory and Policy, P. Krugman & M. Obstfeld, 2009, Pearson Education
 Introduction to International Economics, D. Salvatore, 2009, Wiley-Blackwell
 Applied International Trade Analysis, H. Bowen, A. Hollander & JM. Viaene,1998, University of Michigan
Press
 International Trade Theory, Zhang WB., 2010, Springer Verlag
 Advanced International Trade: Theory and Evidence, R Feenstra, 2003, Princeton University Press
 Handbook of International Trade: Economic and Legal Analyses of Trade Policy and Institutions, EK.
Choi & J. Hartigan, 2004, Blackwell Publishing
 Geopolitics: A Very Short Introduction, K. Dodds, 2007, Oxford University Press
 From Geopolitics to Geoeconomics, T. Lenz, 2009, VDM Verlag
 Understanding International Relations, Ch. Brown & K. Ainley, 2009, Palgrave Macmillan
 Structure and Change in Economic History, D. North, 1983, WW Norton & Co
 The Diversity of Modern Capitalism, B. Amable, 2003, Oxford University Press
 The Great Transformation, K. Polanyi,1957, Beacon
 The Great Divergence: China, Europe, and the Making of the Modern World Economy, K. Pomeranz,
2001, Princeton University Press
 Geopolitics and Geoculture - Essays on the Changing World-System, I. Wallerstein, 1991, Cambridge
University Press
73
Bibliography in French
 Géopolitique – Constantes et changements dans l’histoire, A. Chauprade, 2003, Ellipses

 Géopolitique de l’Europe/ Géopolitique de l’Asie/ Géopolitique des Amériques/ Géopolitique de
l’Afrique et du Moyen Orient, V. Thébault, 2006, Nathan
 Relations Internationales, Ph. Moreau-Defarges, 2002, Seuil
 Economie Internationale, A. Hanaut & M. El Mouhoub, 2002, Vuibert
 Gestion des risques internationaux, P. Chaigneau, 2001, Economica
 Nombreux titres de la collection de poche Repères (dont les taux de change n°103, la nouvelle
théorie du commerce international n°211, les multinationales globales n°187, économie du
risque pays n°421, l’organisation mondiale du commerce n°193), La Découverte
 La globalisation, MH.Bouchet, 2005, Pearson
 Multinationales et mondialisation, JL. Muchielli, 1998, Seuil
 L’invention du marché – une histoire économique de la mondialisation, Ph. Norel, 2004, Seuil
 Les cinq capitalismes, B. Amable, 2005, Seuil
 Les multinationales chinoises, JP. Larçon, 2010, ESKA
 Grammaire des civilisations, F. Braudel, 1999, Flammarion
 Histoire de faits économiques (2 tomes), J. Brasseul, 1997, Armand Colin
 Histoire des faits économiques contemporains, M. Niveau & Y. Crozet, 2000, PUF
74
20 journals, reviews, yearly
reports
 in English:
 Foreign Affairs
 International Economic Review (quarterly review, Wiley-Blackwell)
 Review of World Economics (quarterly review, Springer)
 Review of International Studies (quarterly review, Cambridge Journals)
 The Journal of International Trade and Economic Development (quarterly review, Routledge)
 Information Economy Report (yearly report, UNCTAD)
 World Development Report (yearly report, World Bank)
 World Outlook (yearly report, International Monetary Fund)
 World Trade Report (yearly report, World Trade Organization)
 The world in… (yearly special issue of The Economist)
 in French:
 Ramses (yearly report, Institut Français des Relations Internationales)
 Guide du risque pays (yearly report, COFACE)
 Moniteur du Commerce International (monthly journal of international trade)
 Classe-Export (monthly journal of international trade)
 Diplomatie (monthly journal of international relations)
 Herodote (quarterly review of geopolitics)
 Futuribles (monthly review of prospective)
 L’Expansion Management Review (quarterly review on economy)
 Revue de l’OFCE (quarterly review on economy, SciencesPo)
 Cahiers français (bimestrial review on economy, la documentation française)
75
Websites
 http://www.wto.org world trade organization

 http://www.unctad.org united nations conference on trade and development
 http://www.imf.org international monetary fund
 http://www.oecd.org organization for economic cooperation and development
 http://www.worldbank.org world bank
 http://www.fcia.com foreign credit insurance association
 http://www.coface.fr compagnie française d’assurance crédit
76
Facts and figures: questions ?
 What do you think of the following figures ?
 Average yearly growth over the past decades:

 Production: +3.5%
 International trade: +7%
 Financial flows: +14%
 During XXth century:

 the proportion of manufactured goods in international trade rose from 30% to
80%.
 the relative cost of long range transportation fell from ~25% of the price of raw
materials, to less than 10%.
 the customs duties decreased from an averaged ~20% to less than 5%.
 A few countries exhibit a ratio of exportation compared with gross domestic product
superior to 1. How is this feasible ?
77
Facts and figures: drivers
 innovation
 growth
 consumption
international trade
 transportation costs
 duties
78
Facts and figures
 Exercises based on export-import and GDP figures per country and

per zone (see attached document).
 Calculate past export values, based on yearly increase rate.
 Explain why, at worldwide level, import does not match export.
 Identify net exporters, net importers, well balanced countries.
 Comment the total export of European Community.
 Compare with GDP figures, and comment.
79
Production factors
 The basic reason for sourcing form another country is linked with factors of production. A factor is a
resource which impacts the output, is somehow difficult to acquire, and thus, costs money.
 the three « classical » factors:
 Land: this dates from the time agriculture was a paradigm to economy; industrial activities
are relatively independant of this factor now, and real estate value is just a side effect;
 Labor: this factor is obviously linked to geography; nevertheless, attention should be paid
to its mobilty;
 Capital: the real thing is not « money per se », but « assets »; because capital is, in
principle, available everywhere at the same conditions, this factor should not be essential;
in reality, access to capital and investment conditions are subject to regulations of a great
complexity, due to political interferences;
 the three « new » factors:
 Raw materials: with the rarefaction of natural resources, emphasized by sustainable
development, access to raw materials is now a key factor, all the more since some
governments use it as a political instrument;
 Know-how: this factor was neglected in the classical theory (which considered it as
available freely); resource-based strategy at firm level, and theory of endogeneous growth
at country level, have shown its major importance; it is to some extent linked with labor,
since employees carry their own know-how;
 Location: it is a potential resource, in the sense thatit impacts costs, and that there is a
competition to location (because location is not indefinitely available).
80
Routes
Center and periphery:
81
Routes
Suez and Panama (+ Nicaragua):
82
Routes
Transiberian:
83
Routes
Северный
морской
путь:
84
Routes
New Silk Road(s)/ « One Belt One Road » 一带一路
« Silk Road Economic Belt and the 21st-century Maritime Silk Road » 丝绸之路经济带和 21 世纪海上丝绸之路 )
85
Demography and labor
 Despite automation, workforce remains a major factor of

localization and costs (around 30% in the integrated cost structure
of most manufactured goods, and more in services).
 Sourcing implicitely converges where labor is available, with a
trade-off between wages and skill level.
86
Demography (density)
 Throughout history, the proportion of inhabitants in Asia has

remained constant (around 60% of the population of the world).
 The real change is the decline of western world from 30 to 15%,
while ROW is growing.
 Asia has always been the « factory of the world ».
70
60
50
40 North America
Latin America
30 Europe
20 Africa
Asia-Pacific
10
0
1800
1850
1900
1950
2000
2050
87
Demography (coastal areas)
 Most inhabitants of the world live in (or move to) coastal areas. This
shapes the production and consumption key points, and the supply
chain schemes as well. Only raw materials production remains in
terrestrial areas.
88
Workforce and labor costs
China
Bulgaria
 Labor costs (here in Romania
Latvia
EUR/hour, source SFAC) Lithuania
Slovakia
range from 1 to 30. Poland
Estonia
 Taking workforce
Hungary
Czech Rep.
Malta
productivity, the practical Portugal
Slovenia
span is from 1 to 10. Japan
Cyprus
 Paying attention to
United States
Greece
Spain
education in different UE (27)
Italy
countries is important to United Kingdom
Ireland
determine the level of Euro zone
Luxemburg
skills. Finland
Austria
Netherlands
France
Germany
Denmark
Sweden
Belgium
0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0
89
Leading economies, and others
Triad
BRICS
emerging countries
other members of G20
90
Purchasing Manager in Technology and 29/09/2022
Leading economies, and others
 G20 represents:
 88% of GDP
 64% of population
16,000,000
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0
l
es an in
a
an
y
nc
e m ly zi ad
a ia ia li a co ea ey ia ia
t in
a ca W
t at ap Ch m ra gdo I ta Bra n I nd uss t ra exi
K or urk n es rab n A fri RO
S J er a s iA e
d
F Ki
n C R u M h T do rg th
i te G d A out In a ud A ou
n te S S S
U ni
U
91
Key measurements
 Mesure of exchange:
 balance of trade
 balance of payments
 Measure of wealth and growth:

 Gross Domestic Product (close to 60,000 billion USD per year)
 Gross National Product
 Purchasing Power Parity
 Foreign Direct Investment (over 150 billion USD per year)
 Currencies exchange rates
92
Country risks ratings
 Several institutions estimate/ update risks related to international
trade:
 in the USA: FCIA ; in France COFACE ; etc…
 Two major ratings: business environment, and country perspective
(range: A1, A2, A3, A4, B, C, D)
Country name Business environment Country perspective
Business Country
USA A1 A1 environment perspective
EU (DE+FR+UK) A1 A1
Japan A1 A1 Business
information Economic
Brazil A4 A4 available and weaknesses
reliable
Russia B B
Effective and
India A4 A3 efficient Financial
payment weaknesses
China B A3 system
South Africa A3 A3
Clear
Mexico A3 A4 institutional
Banking
weaknesses
environment
4 « dragons » A1 A2
Egypt B B
Venezuela C C Political
weaknesses
Sudan D D
93
Thought…
 “Now that Asia is becoming capitalist, it will return
to the center of the world economy, where it was in
the early nineteenth century. Current currency
crises are only blips on the screen.”
Jeffrey Sachs
Professor of International Trade/ Harvard
94
Economic global history
 International trade is neither a recent nor a western invention. This « europeo-centrist
perspective », fashionable in the XIXth century, must now leave room to the recognition of
a collective contribution from several civilizations.
 « Market(s) » have progressively emerged out long-range trade. The neolithic long-
distance « supply chains » ushered in the age of commerce. The latter then
prodigiously developed itself between « empires-worlds » (Wallerstein), a concept
close to that of « economies-worlds » (Braudel). An empire-world is a regional zone,
providing systemic structures which articulate a periphery around a center. The major
chain of empires-worlds in history, extends from Europe to Chine, accross Middle East
and India.
 Technical innovations which have made international trade feasible spread over more
ten thousand years. A major turning point, around -500 BCE, consists of the first
systemic structures, involving together finance, enterprise, regulations and insurance.
Historiography shows that disputes between « modernists » and « primitivists », are
definitely out-of-date, thanks to both a more comprehensive analysis of data, and to
the end of ideologies prevailing during the XXth century, as well.
 Globalization, a hot spot as of today, is nothing else but the present stage of a very
long process. It is not in any sense the ultimate omega point (Fukuyama’s « end of
history »). It cannot pretend either to represent a « progress » in terms of values. It is
a simple historical fact.
 A responsible manager may conclude that there is still plenty to improve, and that
learning the lessons from the long term perspective is a must. Studying history of
95 techniques and economy is not a waste of time.
neolithic revolution: first marine flows of raw materials (obsidian), over several hundreds of
kilometers.
protohistory: multimodal trade routes (copper and tin routes,…), over

several thousands of kilometers.
antiquity: development of professional

competencies, logistics techniques, financial
instruments, trade law, insurance, customs (grains, commodities,
consumer goods).
middle ages and early

modern times: sophistication of banking
and insurance systems, development of trade associations and
trade firms, at regional then progressively
worldwide level.
colonial
era and industrial revolution: transportation
efficiency increases, nations emergence with
social
consequences, all instruments invented before are
standardized.
-8000 -1500 -500 1100 1800 1950
globalization»: financial ubiquity, real
time
communications, progressive 96
vanishing of duties, conflict between
 World-systems theory (Wallerstein/ Braudel)

 Theory of Dependence – neo-marxian approach
 Economic World-History”
97
Worlds-Empires/ worlds-
economies
 Neolithic and early antiquity: -10.000 and -500 BCE
 Short-sea + rivers
Mediterranean
Gulf of
Mexico Seas
of
Gulf – Red sea China
– Indian ocean
98
economies
 Silk road: 8000 km, from Xian/ Changan to Rome, -200 BCE
 Land route, connected to short-sea alternatives
Rome
西安 / 長安
99
economies
 Early modern era: XVIth to XVIIIth centuries
 Importance of sea routes and straits
Western
Europe
Eastern
empires
100
Political power and influence
 Countries are involved (maybe sometimes entangled ?) in complex

networks of power, led by a few nations.
extremely high
high
relatively high
medium
101
International trade institutions
 Stage 1: Bilateral trade agreements.
 Old way of life, for 5000 years, which survives when a country is temporarily a candidate to
a bigger community.
 Stage 2: Customs unions and free trade zones.

 Since the middle of the XIXth century, based for a time on colonial empires, then later on
decolonization moves, more than 20 regional trade communities, backed on to political
unions and/or monetary unions.
 Stage 3: Multilateral GATT-WTO.

 Bretton-Woods (1944) launched the International Monetary Fund, and the World Bank, but
failed at launching the International Trade Organization
 After WWII (1949-1993), the General Agreement on Tariff and Trade led globally successful
negotiations to reduce protectionism, in 9 rounds: Geneva, Annecy, Torquay, Geneva II,
Dillon, Kennedy, Tokyo, Uruguay, Doha (the latter has not been completed yet). GATT is a
place to negotiate agreements.
 Uruguay round led to the World Trade Organization (153 members, 97% of world trade).
WTO is a place to enforce application of agreements and settle disputes.
102
Free trade zones and economic
communities
 xxx
EFTA
CIS
EMU EEA
NAFTA
EU GUAM
OPEC
SCO
UMA
AL
SAARC APEC
CARICOM UEMOA AU
MCCA CDAO
CEMAC ASEAN
CAN LAIA SADC
SACU
MERCOSUR
ANZCERTA
103
World Trade Organization
 164 members + 24 observers (as of 2020)
 Source of illustrations: Wikimedia Commons
+ applications in progress…
104
Globalization
 Globalization is not a mere increase in volume of international trade. It is

substantially different, and reflect a typical anglo-saxon mindset. Its specific
features are:
 multinational firms have deliberately and explicitly a worldwide strategy, and

they have no more “citizenship” (the concept of GNP becomes meaningless).
 financial markets are definitely international; short-termism and

sophistication shake the system.
 cause and/or consequence of the two above mentioned facts, the states have
less power; when regulation is needed, the governance is painfully given to
supra-national bodies.
105
Multinational enterprises
(MNEs)
 About 60.000 multinational companies hold 500.000 subsidiaries.
 A part of the financial flow is dedicated to direct investment.
 Intracompany (“intraco”) trade gives birth to exchanges at transfer
prices, carefully audited by administration.
 Multinational firms fall within different governance categories.
 International sourcing often involve subsidiaries of MNEs.
strong global
coordination
global firms transnational firms

low local strong local
coordination coordination
international firms multi-domestic firms
low global
coordination
106
The 5 capitalisms (or more)
 States, people, firms, and other economic agents interact within a
system.
 Not all systems are capitalists.
 Not all capitalisms are alike (i.e. of the “anglo-saxon” kind). Several
segmentations have been proposed. Here is a widely known typology
by Amable.
Market-based Social-democrat Asiatic Continental Mediterranean
Competition free free complex network regulated complex network

price-based quality-based price-based quality-based price-based
Labor flexibility stability dualist stability dualist
trade-unions relational trade-unions
Finance many investors concentrated concentrated concentrated concentrated
very active banks banks banks banks
Wellfare low high low high moderate
Education private public private public private
107
Wrap-up
 International trade has grown throughout history thanks to the interconnection
of regional markets.
 These regional markets are based on a long history of center-periphery
structures. These structures survive in the longue durée any contingent
political transformation. These structure share common culture. They are
the foundations of modern economic communities.
 No trade can happen without logistics, and history shows a coopetition
between high sea, short sea and land routes. High sea routes shaped the
anglo-saxon approach of trade (long distance, weak link with states), and
short sea/ land routes, that of most other countries (direct contact, sense
of citizenship). Indirectly, this influenced the various kind of capitalism,
and in practice, of firms governance and trade relations.
 These two factors are of the utmost importance in strategic sourcing,

negotiation behaviour, and supplier relationship management.
108
(Neo-)classical theory of
 Forerunners:
international trade
 Munn (mercantilism, 1630): sell more products (and buy less), in order to hoard precious metal.
This is a win-lose game.
 Smith (absolute advantage, 1776) opposes mercantilism. The best producer of a good is the
country which has the best absolute labour productivity. Exchange is better than autarcy in both
countries, as long as every party is an expert in something.
 Ricardo (relative advantage, 1817) develops a reciprocal win-win game. The best producer of a
good is the country which has a relatively better productivity on this good (compared with every
other good he could potentially produce).
 Heckscher-Olin-Samuelson (factors endowment) have built on Ricardo’s approach.
 Assumptions (both countries have identical production technology, commodities have the same
price everywhere, production output has a constant return to scale, labor is mobile within
countries but not between countries, capital is mobile within countries but not between
countries, internal competition is perfect).
 HO theorem (1933): a capital-intensive country will export capital-intensive products and
import labour-intensive products (and reciprocally).
 HOS theorem (return on factors,1941): world price increase of a good is linked with the increase
of return on the relatively rarest factor in the country which produces preferably this good.
 Leontief paradox (1954): statistics proves that USA, despite their abundance in cheap capital,
export labour-intensive products and import capital-intensive products.
109
New theory of international

trade
The new theory of international trade disagrees with the assumptions (technologies are
different, commodity prices are different, return to scale is not constant, labour is mobile
between country, and capital is even more mobile, internal competition is never perfect).
Krugman and many other authors emphasize:
 increasing returns to scale : internal and external, a country exports when it already has
an important domestic market
 unperfect competition:
 product differentiation: a country which cannot compete on volume-price will
compete on differentiation(« horizontal » = substitution, and « vertical » = quality)
 intra-branch trade
 technology differences and dynamics
 innovation and « technology factor »
 protectionnism including R&D (Brander and Spencer 1983)
 international mobility
 global firms
 capital allocation
 migrations
 endogeneous growth
110
Protectionism and free-trade
 analysis of duties on trade

 basics (autarcy)
price
supply
Restaurant
market
price
volume demand
of trade
traded quantity
quantity
111

 two countries exchange a good
S
price
exported
S quantity
int’l
market
price D
imported
quantity
quantity EXPORTING COUNTRY IMPORTING COUNTRY quantity
112

 two countries exchange a good/ effect of transportation costs
S
price
exported
S quantity
transport markup
int’l market price
imported
quantity D
quantity EXPORTING COUNTRY IMPORTING COUNTRY quantity
113

 import with duties (effect of customs)
price
S
duties
D
int’l market price
domestic import
volume of trade
quantity
traded traded
quantity quantity
w/ duties w/o duties
114
 While duties have been dramatically reduced, the usage of other

protectionist tools have increased:
 quotas (import or export restrictions)
 subsidies and domestic tax exemption
 dumping (pricing overseas below costs)
 non-tariff barriers (compliance with standards : quality,

environment,…)
115
Currencies and exchange rates
(“forex” rate)
 Every country has its own currency, managed by its central bank. Only a
few countries have entered a monetary union, with a common central
bank.
 Not all currencies are convertible.
 Some currencies have a fixed exchange rate against hard currencies (they are “pegged”). On
the short run, it gives an advantage. On the long run, this provokes issues. A “soft” variant
consists of a collective monetary system. This gives room for devaluation, in order to provide
a temporary competitiveness advantage.
 Other currencies are free-floating, and the “real” exchange rate is a matter of supply and
demand.
 On short term, the central bank can use adjustment techniques, but it is heavily
impacted by speculation and arbitrage. In practice, banks are the major players, and
they use all types of transactions: spot, futures and options.
 Fundamental drivers are used in mathematical models: balance of payments, purchasing
power parity, assets (stocks and bonds).
 A few hard currencies are used for international transactions (USD, EUR,
JPY and maybe CNY). They are therefore also used as reserve currencies
(at least by public actors, since private actors are not always authorized
to hold a foreign currency account). These hard currencies are expected
to be stable.
116
Wrap-up
 Global sourcing requires a good understanding of the mechanisms

which build up prices and make them vary. Otherwise, a apparent
advantage can turn into a disaster.
1. Where lies the fundamental advantage of a country ?

2. Which policy is the country applying in terms of duties ? Are there
some non-tariff (sometimes non-official) features ?
3. How is the currency evolving ?
 These questions should not be answered “as of today”, but also

“from now on”.
117
Part 5
New frontiers
of the XXIst century
Tentative list
1. Food
2. Development
3. Safety and security
4. Production - consumption
5. Urbanism, housing
6. Health
7. Relations between people, political system
8. Information
9. Education, science and culture
10. Leisure
11. Environment
12. Energy
13. Materials
14. Mobility
15. Aerospace
16. What else?
Appendix
Some
prospective
tools
Objectives of time series analysis
 We’re interested in the time evolution of a phenomenon, in

order to describe it, to explain it, and then to predict its futur
evolution.
 For this we have observations at different dates/times, i.e. a

sequence of numerical values indexed by time Yt.
 This sequence is called a time series. It is a sequence of

random variables.
time series
 The analysis consists in :

 Establishing the historical records of data

 Deriving the predictable level of evolutions
130
?
◆ ◆
◆
110 ◆ ◆
◆
◆ ◆
◆ ◆
90 ◆
70
Historical records = Past Predictions = Future
Decomposition method

 Any time series can be decomposed into 4 components:

 c : a trend (reflects mid-term progression),

 s : seasonal variations,
 r : residuals (reflects random perturbations),
 e : exceptional and unpredictable events

 One can write in general : Yt = f (ct ; st ; rt ; et )
 Case of linear model : ct = att + bt

simple statistical methods
 Moving average

 to smoothen historical data

 to make short term forecasts/predictions
 Exponential smoothing
 to make short term forecasts/predictions
 The linear decomposition method, allows one to make

mid term predictions.
Predictions with moving average of order n
 One estimates as the mean of the most recent

values of :
 Example: prediction with moving average of order 3

Exponential smoothing method
 Principle: use all past observations, but with

decreasing weights (very fast decreasing -
exponential)
 Introduce a smoothing parameter

 Weight observations as follow:
 is given weight
 is given weight
 is given weight
 is given weight ,
 … and so on
 the (in principle infinite) sum of weights equals 1
Exponential smoothing method
 The smoothed value of , denoted , is the

weighted sum of all past records:
 We can rewrite this as:
 so that:
Holt Smoothing method:
 Prediction formula: at time t, with horizon h
Ft(h)=at*h+ bt
Slope of Level of
the trend the trend
 Ft(h) is locally linear (in a neighbourhood of t)

 Prediction of y at t+1 = forecast at t time :
= Ft = prediction of Yt
made at time t-1
 Computation of the trend level at t time :
 Computation of the trend’s slope at t time :

 Initial values (other choices are possible)
 Smoothing parameters α and β (with a software like

SPSS or Excel solver)
α and β are chosen to minimise

Example of cycle calculation
 illustration
Methods
▪ Short term:
▪ Time series analysis, trend-cycles
▪ Mid-term:
▪ Monitoring of hypothesis
▪ Model – simulation
▪ Risk analysis
▪ Long-term:
▪ Scenarios
▪ Theory of games
What is a « game » ? Notion of « strategies »
“The study of mathematical models of conflict and cooperation between
intelligent rational decision-makers.” R.B. Meyerson
And the author adds: “not always intelligent, not always rational”.
 There is an action field, with actors, who can play strategies and get
benefits or losses, but don’t talk to each other (or at least don’t tell the
complete truth).
 Each actor (decision maker) has a choice between a set of « strategies ».
 Each actors knows that the other actor has (or, the other actors have) a
choice between a set (or, sets) of strategies.
 Each actor tries to guess what the other actor (or, actors) will decide.
 You are one of the actors, and you have to decide what you play, taking into
consideration the decisions of the other actor (or, actors).
 You know that the other actor is (or, actors are) taking into consideration
your decisions.
What is a « game » ? Notion of « strategies »
This applies to a very wide range of situations:
 In politics:
 general equilibrium mechanism design, voting systems, diplomacy
and geopolitics, military actions, etc
 In business:
 customer and supplier negotiation, auctions, new product
introduction, advertisement, mergers & acquisitions pricing,
industrial organization, etc
Benefits and losses
 Data:
 you need four types of data (acronym « PAPI », Rasmunsen):
Players, Actions, Payoffs, and Information.
 Canonical forms:
 you need to modelize your problem, either as a « characteristic
form », or as an « extensive form », or as a « normal form » (resp.
an equation, a tree, a matrix).
 The easiest model is the table (matrix) especially for two-
dimensional games (if there are only two actors).
Player A
Strat A1 Strat A2 Strat A3
Player B Strat B1 Fill in the boxes with the
Strat B2 payoffs calculated with
available information
Strat B3
Strat B4
Benefits and losses
 In one box (corresponding to Strat (Ax; By)), you write at least one figure: the expected
benefit for if you play x a,d the other actor plays y.
 If you earn something, your benefit is positive. If you lose something, your benefit
is negative.
 When you use only one figure, it means that your benefits are the other actor’s
losses, and reciprocally (it is a simple win-lose game).
 Sometimes, you need to write two, or four figures, or even more (a « vector ») in the
same box:
 If the game is somehow « win-win », the benefits of A do not equate with the losses
of B.
 « risks » are a kind of « losses », but are not necessarily the opposite of earnings.
 Etc
 You may have a vector like (benefit for A; risk for A; benefit for B; risk for B), or
create « a table in the table ».
Strat Ax
Strat By benefit for A risk for A
benefit for B risk for B
Benefits and losses
 A famous example: the Prisoner’s Dilemma
Cooperate Defect
Cooperate (-1;-1) (-10;0)
Defect (0;-10) (-5;-5)
Optimum and equilibrium
Even if this seems counter-intuitive, the notion of « best » is not clear:
 In a one-dimensional problem, there is often an « optimum », i.e. the

best solution in absolute. This may be modelized as a max or min on a
curve.
 In a multi-dimensional problem (with independant variables), there is no

optimum in general, but « dominant solutions », i.e. solutions which are
relatively better than « dominated solutions »; then determining which
dominant solution is the best one remains difficult – it may be the choice
of the closest to the ideal solution.
 In a game problem (multi-dimensional, but not independant), there may

be an « equilibrium », i.e. a solution such that any deviation from this
solution would create a loss for every player. A paradigmatic case is the
« minimax » or « maximin » (see after).
Optimum and equilibrium
Example of dominance:
B1 B2 B3 B4
A1 2 0 1 2
A2 1 2 5 3
A3 4 1 3 4
B2 dominates B3 and B4.

A3 dominates A1.
The reduced form is:
B1 B2 B3 B4
A1
A2 1 2
A3 4 1
Example
 John and Peter are two bakers, and compete on the village bakery market. Both
sell normal bread, and each tries to introduce differentiation. Peter, the newcomer
and challenger, sells luxury bread (L), French pastries (F) and cakes (C). John, who
has been here for a long time, proposes luxury bread (L) , diet bread (D), and
sweets (S).
 Apart from normal bread, which is sold everyday in both bakeries, each one has
tried to sell one and only one different product per day. After a few weeks, they
have tried every possible combination (at random, since they never talk to each
other). They need to decide in advance what they will sell on the next day (to
supply and cook), thus when they make their decision, they never know what the
competitor will do the day after.
 Since they are located in front of each other in mainstreet, while they are doing
their own business, they can also observe in real time what happens in the premises
of the competitor. John has scrutinized the daily sales of both bakeries, noted his
benefits or losses in his logbook, and calculated the average on long term.
 He supposes that Peter has done the same observations. If you were John, what
would you do ? And if not ? After all, what if Peter was doing all of this at random ?
And what about crossing the street, and talk frankly to Peter ?
John
L D S
Peter L 0 3 -1
F 1 1 -2
C 2 -1 1
History
 Oskar Morgenstern, 1902-1977

 John Nash, 1928-2015
 Jean Tirole, 1953-
 >>> 11 Nobel Memorial Prizes in economic science
Criteria and behavior
The « minimax »:
 You guess that the other actor tries to minimize your benefit.
 You will choose a strategy such that, whatever they other will play, your
benefit would be better than with any other strategy you could have
played.
 In other words, (let’s assume that you play the columns, and the other
actor plays the rows) you choose the column with the highest minimal
value.
 This « highest minimal value » is called the « minimax ».
 The symetrical choice for losses, risks, and other negative outcomes is
the « maximin ».
Note: if you focus on losses, risks, or any similar negative outcome, you will
try to minimize it. In this case, you will play the « maximin ».
Example of minimax (in this example, outcomes are B

benefits = A losses):
Player A
Strat A1 Strat A2 Strat A3
Player B Strat B1 5 1 3
Strat B2 3 2 4
Strat B3 -3 0 1
The minimal earnings for B are (per row): 1, 2, -3

The maximal losses for A are (per column): 5, 2, 4
In the end, they will play (A2;B2).

Various criteria (1/3) based on your attitude ex ante:
 Naive criterion: you are very optimistic, and you choose the strategy which will
maximize your benefits (and you guess that the other actor will play exactly what
you expect). This is also called the « maximax ». The most dangerous and stupid
strategy, unfortunately played everyday by all enterprises of the world, as long as
they neglect the degree of freedom of other actors !
 Von Neumann’s or Wald’s criterion: you are cautious, and you are satisfied with
the minimax of benefits (or the maximin of losses).
 Hurwicz’s criterion: you are realistic. You calculate [axMax+(1-a)xMin] of your
columns, where a is your « coefficient of optimism » (invert Max and Min for
losses), and choose the highest score.
Note: of course, these criteria apply to you and to the other party, or, to be more
subtle, you may combine one criterion for you, and another criterion for the other
actor.
Various criteria (2/3) based on your attitude ex post:

 Savage’s criterion: you don’t want to regret afterwards a decision
which has increased your shortfall (i.e. missed opportunity of benefits).
You calculate a « regret matrix », and choose the maximin of regret (as
for a risk minimization).
 Satisfaction criterion: you are courageous, and don’t want to simply
jump on the minimax of benefits. You calculate a « satisfaction matrix »
and choose the minimax of satisfaction. Similar (opposite) to Savage’s
criterion.
 Volatility criterion: you want to avoid deviations from the target. You
calculate the spread or the standard deviation of the outcomes of each
strategy, divided by its average, and you choose the decision with the
smallest « volatility » ratio (it’s a bureaucratic criterion).
Note: of course, these criteria apply to you and to the other party, or, to be
more subtle, you may combine one criterion for you, and another criterion
for the other actor.
Various criteria (3/3) based on the other actor’s attitude ex ante:
 Bernoulli’s criterion: you have observed that the strategy of the other
actor shows statistical frequencies, independant of your strategy. Then
you weight each of his strategies with the corresponding frequency, and
you choose the weighted maximax.
 Laplace’s criterion: you have observed that the other actor plays at
random. The strategies are equiprobable. A generalization of Bernoulli’s
criterion.
Two real situations are particularly important:

 when you play « against the Nature » (natural phenomenons look like
decisions, but they are not driven by intention, and follow adistribution
of probability), a typical case being risk analysis.
 If there is « imperfect information » (missig data).
Note: of course, these criteria apply to you and to the other party, or, to be
more subtle, you may combine one criterion for you, and another criterion
for the other actor.
Multi-criteria example (1/6)
 Let’s start with this matrix:
Player A
A1 A2 A3 A4 A5
B1 11 4 8 12 9
Player B
B2 12 10 13 11 7
B3 10 4 9 12 10
B4 5 3 4 10 11
B5 6 2 0 4 8
 You are A, and the outcomes are your benefits.
1. We apply the different criteria.

2. Then we try to find a good solution, taking the minimax
and each of these criteria into account.
 Minimax (Wald/ Von Neumann)
Player A
A1 A2 A3 A4 A5
B1 11 4 8 12 9
Player B
B2 12 10 13 11 7
B3 10 4 9 12 10
B4 5 3 4 10 11
B5 6 2 0 4 8
min 5 2 0 4 7
minimax 7
 We choose strategy A5
 Other simple criteria SIMPLE CRITERIA
Bernoulli
coefficients
Player A
Notes: A1 A2 A3 A4 A5
Hurwicz optimism coeff. is 0,75 B1 11 4 8 12 9 5%
Player B
B2 12 10 13 11 7 12%
Bernoulli’s coeff. are on the right B3 10 4 9 12 10 29%
B4 5 3 4 10 11 37%
B5 6 2 0 4 8 17%
min 5 2 0 4 7
minimax 7
max 12 10 13 12 11
maximax 13
Hurwicz0,75 10,25 8 9,75 10 10
max Hurwicz 10,25
Bernoulli 7,76 4,01 6,05 9,78 9,62
max Bernoulli 9,78
Laplace 8,8 4,6 6,8 9,8 9
max Laplace 9,8
volatility 0,354 0,681 0,731 0,341 0,176
min volatility 0,176
 According to various criteria,

we hesitate between different strategies
 We derive matrices for regrets and/or satisfaction:
Left-hand side columns shows: DERIVATED MATRICES
Satisfaction
Savage
 Max per line (Savage)
 Min per line (satisfaction) regretsA1 A2 A3 A4 A5
12 B1 1 8 4 0 3
13 B2 1 3 0 2 6
12 B3 2 8 3 0 2
11 B4 6 8 7 1 0
8 B5 2 6 8 4 0
min regrets1 3 0 0 0
satisfaction
A1 A2 A3 A4 A5
4 B1 7 0 4 8 5
7 B2 5 3 6 4 0
4 B3 6 0 5 8 6
3 B4 2 0 1 7 8
 Now, we hesitate between 0 B5 6 2 0 4 8
ambiguous alternatives with max satisfaction
7 3 6 8 8
the same score.
 Let’s make a series of bi-criteria decision between minimax in x-axis
(the most objective) and each other criterion in y-axis.
minimax-maximax minimax-Hurwicz minimax-Bernoulli
14 12 12
12
10 A5
10
A5 10
A5
8 8
8
6 6
6
4 4
4
2 2 2
0 0 0
0 1 2 3 4 5 6 7 8 0 1 2 3 4 5 6 7 8 0 1 2 3 4 5 6 7 8
minimax-Laplace minimax-volatility minimax-Savage

12 0,8 3,5
0,7 3
10
8 A5 0,6
0,5
2,5
2
6 0,4
1,5
0,3
4
A5
1
0,2
2 0,5
0,1
0
0 1 2 3 4 5 6 7 8
0
0 1 2 3 4 5 6 7 8
0
0 1 2 3 4 5 6 7 A1
8
minimax-satisfaction
9
8
7
A5
6
5
4
3
2
1
0
0 1 2 3 4 5 6 7 8
Note: for volatility and regret, we search the min (not the
max), while for other criteria, we look for the max.
 And the results are less ambiguous: MULTICRITERIA DECISION
A1 A2 A3 A4 A5
min 5 2 0 4 7
max 12 10 13 12 11
min 5 2 0 4 7
Hurwicz10,25 8 9,75 10 10
min 5 2 0 4 7
Bernoulli7,76 4,01 6,05 9,78 9,62
min 5 2 0 4 7
Laplace 8,8 4,6 6,8 9,8 9
min 5 2 0 4 7
volatility
0,354 0,681 0,731 0,341 0,176
min 5 2 0 4 7
min regrets1 3 0 0 0
min 5 2 0 4 7
 We should choose strategy A5, max satisfaction
7 3 6 8 8
except if we take into account regrets.

Types of games:
Cooperative and non-cooperative games
 There are two basic options, with sub-options and even more subtle cases:
 Either you play a win-lose strategy (and you never talk to the other party).
Two sub-cases:
 Selfishness: what you earn is what he loses, and you try to make
benefits.
 Sabotage: what you want is to do a maximum harm to him.
 Or you play a win-win strategy (there is not only a communication between

parties, but also common decisions and binding agreements). Again, two
sub-cases:
 Collaboration: you try to make him make benefits, as long as it costs
nothing to you.
 Altruism: you try to get the highest common benefit.
Note: if there are more than two actors, a combination of cooperative attitude
amongst some actors but not all of them (called « coalitions ») and non-cooperative
attitude with third-parties actors (the « others ») can occur. In very large
populations, it is called « multi-actors games » or « population games », and the
Types of games:
Simultaneous or sequential games
 In simultaneous games, you make the decision at the same time as the
other actor. So you don’t know which strategy he will play, and he doesn’t
know which strategy you will play.
 In sequential games, since you make only one decision at a time, each
actor knows what is played by the other party.
 This is particularly important when actors have to make a long series of

decisions, step by step. This oposes the one-time games to the
Types of games:
others
 Zero-sum games describe cases when the sum of all benefits from all the combinations of
strategies is null, typically for win-lose situations. (reciprocally, there are non-zero-sum
games).
 Symmetric games describe cases when the list of decisions is the same for both actors,
typically for competition on an equal footing (reciprocally, there are asymmetric games).
 Continuous games describe cases when strategies are not really distinct from each other and
vary continuously with a parameter, typically when the variable is the quantity of resource
involved in the decision (reciprocally, go/ no-go situations are discrete games).
 Infinite games describe cases with a neverending sequence of decisions. You may « trunk »
after a certain number of iterations.
 Combinatorial games describe cases with a very high number of combinations of strategies.
You need « heuristics » to simplify the analysis.
 Pooling games (« learning » games) describe cases in which you keep memory of past
decisions to shape the next ones: information missing in the beginning can be discovered by
playing.
 Metagames describe cases with the possibility to change the rules.

Probabilistic extensions
 There are four ways to introduce probabilities in a game:
1. A first level consists of assuming a certain frequency of occurrence of the

strategies played by the other actor (either Laplace’s criterion, if you know
nothing at all, and guess that the other actor plays at random, or Bernoulli’s
criterion, if you have observed certain « patterns » of strategy without
knowing why they are choose, which is a « Bayesian approach »).
2. A second level consists of working on the probabilistic value of the

outcomes. The simplest approach is to use average and standard deviation of
the outcomes, and make a decision based on a given level of confidence.
3. A third level consists of the evolution of the outcomes versus time, in a long
time (or infinite) sequence of decisions.
4. A fourth level consists of studying very large populations of actors with

Game and graph equivalence
 The choices between the different strategies in game theory can be replaced
by a « decision tree » (a kind of « oriented » graph without cycles).
 The table of outcomes in game theory is nothing else but a « valuation » of

the graph.
Game and (non-)linear program equivalence
 The « outcome » (or « payoff ») in game theory is very similar to the

« objective function » (or « economic function ») of mathematical
programming.
 The « strategies » in game theory is very similar to the « variables » of

mathematical programming.
 The structure of the table (the « matrix ») in game theory is very similar to
the system of equations describing the set of constraints of linear
programming (nevertheless, a manipulation of the data is necessary).
 Very advanced students will notice that « differential games » (i.e. games
whose outcomes are governated by differential equations) correspond to
dynamic programming.
Wrap-up
Thank you for your attention.
Which key points from this

session would you keep in your
Personnal Progress Plan ?
for more information, contact Eric David
erdavid@em-lyon.com
eric.david@centraliens.net

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MSc in Cybersecurity

Geopolitics and Industrial Issues (7KLGEO)

Geopolitics, the battlefield

tel +33 (0) 612041088

 Understand the dynamics of international context,

 Know how to use your skills to avoid traps in prospective

 Apply this to real cases, and learn by investigating.

 25% individual marks from critical readings:

 25% individual marks from final exam:

 50% collective marks from groupwork (groups of 2 or 3

PolemoV pantwn men pathr esti.

Ginomena panta kat erin kai crewn.

Heraclitus (~544; ~480)

 The world can be analysed as a field of power and influence

Three main streams:

Thucydides, Machiavel, Fichte, Hegel, Marx, Engels, Aristotle, Zeno, Cicero,

sovereignty, balance of treaties, legal system,

Realpolitik, cynism, Revolution, propaganda, Liberalism, enlightenment,

Bismark, Eisenhower/Foster- USSR, China, Cuba, North- Wilson, United Nations,

▪ Highlights the importance of geography in international

German school Anglo-saxon school French school Geoeconomics

Heartland, coastland, Possibilism, human Possibilism,

▪ Sources of power (source Buhler):

▪ Center and periphery

▪ Interaction with neighbouring powers

▪ The wording was coined by

Writing a contract gives an advantage on the other party (« power of the

Except in special cases, a contract is binding only for the parties.

Not everybody has a right to sign a contract on behalf of an enterprise.

A contract is not necessarily written.

Many types of contract: sales, agency, license,…

1. Foreword > responsibilities

1. Commercial law, Transportation regulation

 Sales (ownership, liability, payment)

 Intellectual property and licensing

 Agent and distribution

 Free-competition and anti-trust regulation

 Guarantees and bonds: execution, country, transport, credit,

 Insurance. What is insured ?

+ Lex mercatoria/ Vienna and other conventions/ Communautary

It is more effective to use an alternative dispute

Knowing this prevents from misunderstandings.

 Inputs from human sciences

 What do you mean when you say « yes » ?

 The silent language, E. Hall, 1959, Doubleday

 Anthropologie structurale, C. Levi-Strauss,

 Interacting (introducing, small talk, gifts, politeness-precedence, eating out with

…all of these situations differ from on country to another.

 Intercultural issues are communication issues.

 Communication is an interaction. It follows a scenario (combining sequential and simultaneous

 Communication uses both verbal and non-verbal channels.

 Communication involves persons;

 Even unconsciously, each communication (interaction) follows a scenario, and people

 Many human sciences (and even « hard » sciences) contribute to intercultural

Cognitive INTERCULTURAL Systemics

 Applied to various fields (from machines to economy, from living creatures

 Three major inputs:

 Max Weber (religion)

 Claude Levi-Strauss (structuralism)

 Maurice Godelier (gift)

 Michel Crozier (actors)

 Henry Mintzberg (organizations)