After a near collapse of the United States automobile industry and record bailouts by the U.S. Government, automakers are offering huge bonus payments to their UAW employees. Workers believe the move is justified because they made equally large concessions to help their employers get through tough times. The payments are being made in advance of new contract negotiations where the companies are expected to ask union workers to give up their cost of living adjustments in favor of gain-sharing plans.
Discuss the strategic reasons behind the desired shift from cost of living adjustments to gain sharing.
The article mentions several forms of increasing pay. These include cost of living adjustments, profit sharing, and gain sharing. Compare and contrast the three approaches. Discuss the benefits and risks for workers associated with switching to a gain-sharing plan.
With collective bargaining on the horizon, why are Chrysler and General Motors offering generous profit-sharing payments?
European Union (EU) leaders met over the weekend to discuss plans on how to restore confidence in the euro and to prevent a future euro-zone crisis. German Chancellor Angela Merkel informally presented a competitiveness pact designed to bolster the competitiveness of the euro-zone economies. The proposals, developed by Germany and supported by France, called for increases in retirement ages, limits to wage increases, and harmonization across the EU for corporate and other taxes rates. Chancellor Merkel indicated that the aim of the proposal was to identify the best practices among euro-zone members and have others adopt them. The plan also called for a “debt brake” that would limit the ability of governments to access funds from the capital markets to continue spending. Ms. Merkel’s proposals highlighted sharp disagreements among the EU members. The heated discussions even involved some of the 10 EU leaders whose countries are not in the euro zone over concerns that the plans could undermine a single European market. The leaders were unable to reach consensus on plans to strengthen the EU bailout fund, but will hold further discussions in March. Lack of substantive progress on a comprehensive plan to restructure the EU could renew euro volatility in the financial markets.
QUESTIONS FOR DISCUSSION:
The level of disagreement and the divergent views at the summit have some doubting whether a substantive plan could be agreed to by the end of March. How long can the EU continue to debate the issues rather than take action before the euro-zone suffers perhaps irreparable harm?
As the euro zone’s largest economy, Germany is likely to bear the brunt of the financial burden for any financial rescue of the euro. Is Germany wise to insist on changes in competitiveness policy by euro-zone members before agreeing to an expansion of the bailout fund, even if it creates volatility in the currency markets?
The official age to receive retirement benefits is 58 in Greece but 65 in Germany. French President Nicolas Sarkozy endured a difficult political battle in order to increase France’s retirement age last summer. Will it be possible to get consensus across the EU members as to the appropriate retirement age?
Canadian Prime Minister Stephen Harper and United States President Barack Obama met to discuss joint strategies for dealing with issues involving border crossings, security, and trade for the two countries. An estimated 1.6 billion worth of goods and services and 300,000 people cross the U.S.-Canada border each day. The two nations seek to develop regulations that make it easier and less expensive for Americans and Canadians to do business but yet still protect one of the busiest national border crossings. The two countries want to maintain security but yet accelerate the legitimate flow of people, goods and services. The broad-based proposals include provisions for joint screening measures for cargo, the sharing of technologies and law enforcement, and regulatory cooperation. Proposals include common standards for tracking those entering and leaving the countries and a call for greater intelligence-sharing. The United States increased its border security efforts following the 9/11 terrorist attacks, which has slowed cross-border shipment flows. The two leaders announced the formation of a bilateral Regulatory Cooperation Council to slash the bureaucratic red tape contributing to the shipment slowdowns.
QUESTIONS FOR DISCUSSION:
President Obama and Prime Minister Harper seem to want to speed up border crossing times for shipments between the U.S. and Canada but yet keep the border secure. Are the two compatible goals?
The United States and Canada share a nearly 4,000-mile border and many Americans equate border issues with security. How should President Obama address potential concerns that policy changes will make it easier for terrorists and criminals to slip into the country?
Some Canadians feel that the United States tightened the border too much after the 9/11 terrorist attacks and they have concerns that new joint policies will force Canada to align its visa and immigration policies with more restrictive U.S. policies. How should Prime Minister Harper address potential concerns that policy changes will make it difficult for Canada to maintain its national sovereignty?
In his recent State of the Union speech, President Barack Obama frequently mentioned the importance of innovation for the United States economy. One of the reasons that North America continues to dominate the global economy is that conditions are right for innovation to flourish. Creativity is the basis for innovation. Scientists have been studying creativity for years in an attempt to understand its origins. So far, this research tells us that creativity does not emerge from a specific part (i.e., the right side) of the brain. It appears that different mechanisms control different types of creativity. Prevailing thought is that self-restraint and evaluation are suppressed when individuals are most creative. Research has a long way to go, but creativity will remain an important factor in business.
1. Review the definitions for creativity and innovation in your text. Are the two concepts interchangeable? Discuss how they are related and how one concept differs from the other. Use the “brick question” to illustrate your answers.
2. If recent research is accurate and creativity levels are declining in North America, what are the implications for business?
3. Examine the innovation process. The article describes creativity as involving both divergent (generating many unique ideas) and convergent (narrowing ideas into the best result) thinking. At what points of the process are these two styles of thinking most likely to occur? As a manager, how would you encourage both?
SOURCE: A. McIlroy, “Neuroscientists Try to Unlock the Origins of Creativity,” The Globe and Mail (Retrievable online at http://www.theglobeandmail.com/news/technology/science/neuroscientists-try-to-unlock-the-origins-of-creativity/article1887117/singlepage/#articlecontent)
The Dow Jones Industrial Average has been up sharply in recent weeks. That all changed when protests turned to rioting in Egypt. At the same time, oil prices increased dramatically. Lenders to Middle Eastern countries are seeing the cost of protecting their investment going up precipitously. Some analysts contend that Egypt is just an excuse for market corrections that are overdue. However, others believe this may be just the beginning of deeper corrections.
Which dynamic forces are affected by the current unrest in Egypt? How should companies in the United States respond to these forces?
In a bit of irony (given the discussion on page 62 in your text), the Egyptian government shut down internet access and limited cellular phone service. Discuss the implications of such a move. Do you believe the move warrants international regulation of access?
Discuss how events in Egypt and throughout the Middle East relate to environmental uncertainty. What are the factors contributing to uncertainty? How would you classify (i.e., which quadrant of Figure 3.3) the current level of uncertainty?
Chinese cotton farmers are holding on to their harvest from the past season waiting for prices to climb. Estimates suggest the amount of cotton being held off the market may be close to two million metric tons representing nine percent of the world supply. This hoarding coupled with a lack of production reporting throughout Asia has made the cotton market slightly volatile.
Is there a competitive advantage for Chinese manufacturers given the situation described in the article?
How is hoarding affecting supply chain management, particularly in China?
How should a shirt manufacturer respond to the present situation in terms of inventory management? Do your recommendations change depending on whether the manufacturer is located inside or outside of China?
Let’s extend the analysis for this hypothetical shirt manufacturer. Assume the company makes only cotton shirts. What type of cost does cotton represent? If the price per pound of cotton goes up, how does this affect the manufacturer’s break-even point?
At the World Economic Forum in Davos, Switzerland, trade ministers from the several countries met to renew interest in the current round of multilateral negotiations under the World Trade Organization (WTO). The Doha Round of negotiations began nearly 10 years ago and discussions have been stalled for several years. The governments nearly reached an agreement in 2008 when developed nations agreed to cut their farm subsidies and industrial import tariffs in return for developing nations lowering their tariffs on industrial goods. The perception of some developed economies is that the poorer countries interpreted the deal to mean that they would have to do nothing to reap the benefits of the concessions by the developed economies. The level of concessions offered by developing nations is considered minimal. The proposed deal in 2008 collapsed over disagreements between the United States, China and India over agricultural subsidies and special safeguard mechanisms for developing economies. Now there is increasing pressure being placed on fast-growing economies like China, India and Brazil to take greater responsibility in world economic affairs and for them to make greater concessions to reach a global trade deal. Peter Sutherland, the first director of the World Trade Organization, co-wrote a report that contends that if agreement is not reached this year the Doha Round may never be completed. This is a sentiment that appears to be shared by British Prime Minister David Cameron.
QUESTIONS FOR DISCUSSION:
Global trade has continued to proliferate despite the lack of progress in the Doha Round. Is it necessary to continue to seek multilateral consensus on this trade agreement?
Bilateral trade agreements such as the proposed free trade agreement between the United States and South Korea have dramatically increased since the Doha Round stalled. Is this trend toward regional economic integration through smaller agreements a positive trend or not? Is regional economic integration our friend or foe?
A lot has changed in the 10 years since the Doha Round of negotiations began. Some countries considered poor when the talks began such as China and India now are the world’s fastest-growing large economies and have already recovered from the global economic downturn. Do the terms of the proposed trade agreement need to be changed to reflect the fact that countries like China and India should be asked to make greater concession to reach a global trade deal?
Multilateral trade negotiations often take several years to complete and the last successful round, the Uruguay Round, took eight years to complete. Is the Doha Round doomed if agreement is not reached this year? Why do you think Peter Sutherland and Prime Minister Cameron believe this year is critical for progress with the Doha Round?
Public protests that began in Tunisia have now spread to Egypt. The last several days have seen widespread public protests and riots with citizens attempting to oust President Hosni Mubarak and end his 30-year reign. More than 100 citizens may have been killed with clashes with police and the military. President Mubarak seems to be intent on staying in power and has ignored pleas from the United States to embrace reform. Citizens in Egypt are increasingly being cut off from the outside world as the Egyptian government was successful in cutting internet and cell phone service to the country. Egypt’s various opposition groups seem to have come together in unity to foster regime change. Egypt’s opposition groups have been rather splintered and therefore less effective in their ability to bring about regime change. Muslim Brotherhood, Egypt’s largest and best-organized opposition force, has focused on the growing desire for democratic change rather than religious beliefs to help unify the opposition. Mr. Mohamed ElBaradei, a Nobel Peace Prize laureate and pro-democracy reformer, returned to Egypt and appears to be a likely replacement for President Mubarak should he resign or is ousted. The desire for regime change has also shaken other countries in the Arab world with rallies in Jordan, Yemen and Algeria.
QUESTIONS FOR DISCUSSION:
The United States has had a long-standing implicit agreement with President Mubarak to not intervene in his administration in exchange for his keeping radical Islamic influences at bay. Should the United States continue with this policy or seek to distance itself from President Mubarak?
Will eliminating internet and cell phone access be successful in quelling the riots or is it likely to further embolden Egyptians to find new paths to institute regime change?
Egypt’s armed forces, with a force of roughly 1.4 million, are the 12th largest in the world. There is some question as to whether President Mubarak has complete control over the military. What would be the likely consequences if the military is able to oust President Mubarak?
The unrest in the Arab world is rattling investor confidence and negatively impacting stock prices. How are the markets likely to react to the events this weekend?
Chinese President Hu Jintao visited the Chicago area for four days. His stops included a very formal dinner with Chicago Mayor Richard Daley, Walter Payton Prep School, and suburban Woodridge (a town even native son Barack Obama has not visited). Big deals were made – the Chinese agreeing to purchase Midwestern soybeans for $1.8 billion.
While most of tiny Woodridge, Illinois did not know the Chinese president was there, his visit to Chicago and its suburbs was important nonetheless. Discuss why the forces of globalization compel Hu Jintao to visit this tiny hamlet.
Why would a company like Wanxiang want to go global, particularly in Chicago?
Discuss the importance of the Chinese delegation in terms of managing export-import relationships.
The visit by the Chinese president may have had a public relations component to it. As companies consider doing business in China and with Chinese companies, what are some of the ethical challenges involved?
Google is a business run by committee. At least it was. Now Larry Page replaces Eric Schmidt. The triumvirate of Page, Schmidt, and innovator Sergey Brin sometimes held the company back because they could not agree. Page has the opportunity to move Google forward if by no other means than offering a more comfortable (and understood) public presence.
The article frequently mentions scaling in relation to Google’s success and as a factor most likely to determine whether Google will be supplanted by Facebook, Twitter, or some other company. What is scaling? How does it fit in the innovation process? Why do you think some companies are able to do it while others are not?
Review the characteristics of innovative organizations in your text. Based on your own knowledge of Google and what you can determine from the article, what are the key characteristics that make Google innovative?
What type of change leadership does the move to replace Eric Schmidt with Larry Page represent?