FIRM BEHAVIOR IN EMERGING MARKET ECONOMIES1
BIND 2552, MODULE 6 (Mary 4-June 15)
SATURDAYS, 8:30-11:30, 110 MERVIS HALL
1.5 CREDITS

Daniel S. Fogel
Joseph M. Katz Graduate School of Business
University of Pittsburgh
648-1564: 648-1552 (fax); FOGEL@VMS.CIS.PITT.EDU

SYLLABUS AND ASSIGNMENT SCHEDULE

The course has four educational objectives:

1. The development of an understanding of the distinctive nature and challenges emerging market economies;
   
2. The specification and application of an analytical framework for examining those business environments for entering or sustaining a business venture;
   
3. An analysis of specific management issues and techniques for doing business in emerging markets;
   
4. The development of an ability to acquire and interpret data on emerging market economies and businesses in those economies.

We will cover the following topics:

• Handling political change including handling business-government relationships
• Coping with economic instability and scarcity
• Entrance and sustainable relationships
• Producing abroad

Governance; Privatization
Financing Purchasing Power Party;
Foreign exchange effects
Ethics of doing business
Human resource management
The ecological challenge of emerging markets

We will address these topics through cases, reading, lectures, videos, guest lecturers, and discussions.

Questions Addressed

• Do economic freedom and political freedom matter to wealth creation in emerging markets?
• What roles does the government play in emerging markets, roles that are different from developed markets?
• What is unique about doing business in emerging markets?
• What privatization methods are being used in emerging markets and which ones seem most effective?
• How can a firm identify the key factors for doing business in a specific country?

Resource Materials (not required)

Course packets are available at Copycat on Forbes Avenue.

Austin, James E. (1990). Managing in Developing Countries: Strategic Analysis and Operating Techniques. New York: Free Press. This book contains the analytical and technical readings that you can use in conjunction with the case studies.

Kornai, J. (1994). The Socialist System: The Political Economy of Communism. Princeton, NJ: Princeton University Press. This book focuses mostly on Central and Eastern Europe but is useful for understanding all socialist systems.

Thompson, A. and Strickland, A. (1996) Strategic Management: Concepts and Cases. Ninth Edition Chicago, IL: Irwin. This is an excellent resource for strategy formulation and implementation .

Fogel, D.S. (1996) Country and company analyses in emerging market economies. University of Pittsburgh.

Fogel,D.S. (1995) Firm Behavior in Emerging Market Economies. (Editor) Hants, England: Avebury.

Fogel,D.S. (1994) Managing in Emerging Market Economies. (Editor) Boulder, CO:

http://www.stat-usa.gov/itabems.html. This web site is a US government resource on the "big ten" emerging market economies.

Course Requirements

Country and Company Analyses (50%): I've designed this analysis for you to study a specific emerging market economy. The company analysis section is your assessment of two to three companies doing business within the country. This assignment should be completed in groups. Your paper should include but separately handed in, comments on your understandings about what is unique about doing business in the emerging market economy you study. You may take the position that "nothing" is unique about the environment. You could divide up the emerging market economies we studied and suggest unique factors for doing business according to your country groupings. Or, you could choose to generalize across all the countries we've studied. We will form a book on each country.

Standard Paper Outline

Economic Freedom Index (Holmes; The Economist articles)
Macro Economic Data of the Country including comparative data
Industry Structure (CGE)
Company(ies) Information; competitiveness financial and nonfinancial (CGE)
Country policy map related to companies (Austin Ch.) Stakeholder analysis (MSP)
Relationships with government-company resources; economic cost/benefit (Austin Ch.)
How government needs are met; strategies used
Political risk assessment (Haner)
Assessment of Privatization
Process as it impacts the company
Property rights analysis (Milgrom and Roberts)
Environmental analysis
Excellent data sources;contacts
Specific issues: Marketing; financing; operations; human resources

Data Project (50%) An extensive group project that spans the Module and involves your use of various data sources, especially CD-ROM, Electronic databases, and the Internet.

Contract Grading
1. Country and company analysis; data project; class attendance (A, A-)
2. Country and company analysis; class attendance (B, B+)
3. Data Project; class attendance (B, B-); (If you choose #3 you are required to complete the two optional questions)

Course Outline

May 4; May 11:

To what extent are emerging markets unique?
How can we compare economic systems?
What do companies do to handle political change including business-government relationships?

CASE: Standard Fruit Company in Nicaragua [HBS: 9-390-105; rev. 11/92]. Note: Nicaragua: Political Background [HBS: 9-390-100]

1. Was the revolution foreseeable?
2. What is your evaluation of Standard's actions during theinsurrection?
3. Which variables in the business environment were changed by the revolution and how did that affect Standard's operations?
4. What is your evaluation of Standard's actions after therevolutionary regime came to power?
5. What should Standard do now? What do you think the governmentwill do?

CLASS VIDEO: Economies in Transition "Inside the Global Economy" series. Annenberg/CPB Collection, 1994.

Emerging Market Powers (Brazil). PBS Video Series, January 1996.

READINGS:
Austin, J.E. (1990) "Business-Government Relations" Managing in Developing Countries: Strategic Analysis and Operating Techniques. New York: Free Press: 147-184.

"Economic Freedom" The Economist Jan. 13, 1996: 21-23.

Holmes, K. (1994) "In search of free markets." The Wall Street Journal, December 12.

"Shake, Sither, Schuss." The Economist. January 6, 1996: 57-58.

"A beastly bureaucratic burden." The Economist. December 2, 1995: 84.

May 18: Entrance and sustainable relationships; Coping with economic instability and scarcity; Producing abroad.

CASE: Colgate-Palmolive in Mexico [HBS: 9-390-096; rev. 6/93]

1. Where and how seriously is the inflation affecting the company?
2. What is your assessment of how the company has been dealing with these problems?
3. What actions should the company take in November 1987?

READINGS:
McDonald, K. (1993) Why privatization is not enough. Harvard Business Review. May-June: 49-59.

Haner, F.T. and Ewing, J.S. (1985) Country Risk Assessment: Theory and Worldwide Practice. New York: Praeger Scientific: Chapters 1-4 (pages 3-76).

CLASS VIDEO: Emerging Market Powers. (Mexico, Brazil) PBS Video Series, January, 1996.

We will use this class time to formulate a standard outline for the country and company analyses.

May 25: Governance; Financing; Accounting Issues

CASE: An Tai Bao Pao [HBS: 288-041]

1. Compare the project's structure and financing as conceivedoriginally by Occidental and the final proposed deal.
2. Analyze the deal as to its clarity of responsibilities; who has what advantages and how was the financing handled?
3. What advice would you give to Armand Hammer?

CLASS VIDEO: "Developing Countries." Inside the Global Economy series. Annenberg/CPB Collection, 1994.

READINGS:
"Ownership and property rights. " In Milgrom, R. and Roberts, J. (1994) Economics Organization and Management. New Jersey: Prentice Hall: 288-324.

June 1: Human resource management

CASE: FOCH-SVITEK (B). INSEAD. 1994.

CLASS VIDEO:Emerging Market Powers. (China) PBS Video Series, January, 1996.

READINGS:
Kao, J. (1993). The worldwide web of Chinese business. Harvard Business Review. March-April.

Rethinking China. Business Week. March 4, 1996: 57-65.

June 8: The ecological challenge of emerging markets; foreign corrupt practices and ethical issues

DATA PROJECTS DUE

CASE: Where did all the elephants go? [HBS:9-793-131; rev. 7/93]

1. What are the principal causes of the loss of wildlife?
2. What do you recommend be done?

CLASS VIDEO: Emerging Market Powers. (India) PBS Video Series, January, 1996.

READINGS:
"Ethics and the environment." In M.G. Velasquez (1992). Business Ethics. Third Edition. Englewood Cliffs, NJ: Prentice Hall: only pages 212-257.

Week of June 10: COUNTRY AND COMPANY ANALYSIS PROJECTS ARE DUE

1 For this course, the following countries are considered emerging markets: China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan, Thailand, Vietnam, Argentina, Brazil, Chile, Columbia, Mexico, Venezuela, Greece, Israel, Portugal, Nigeria, South Africa, Turkey, Czech Republic, Hungary, Ukraine, Poland, Russia.