Vietnam Part 4: Back in New York

Kit O’Connor ’17

NEW YORK – Back home, I think I finally know what time it is after nearly six days in the US – when people say that the jet lag is significantly worse west to east, they’re not kidding. It’s strange to think that four weeks ago, I was just getting ready to leave for Hong Kong en route to Vietnam, but now I can say that I definitely have an appreciation for and basic understanding for both the country of Vietnam and the economic environment therein. And, of course, a newfound appetite for $2 banh mi sandwiches.

To structure the overall lessons of the course, I’m going to break this into three main takeaways, two that I’ve previously discussed (but are critically important) and one other key aspect of life and business in Vietnam.

Takeaway 1: The emerging consumer economy will be the driving force of Vietnamese growth in the near term.

It’s quite easy to assume, as, frankly, I did, that Vietnam would be composed primarily of manual laborers who worked for subsistence while manufacturing the gadgets and clothes that are immediately shipped to richer countries. While Vietnam certainly has a thriving manufacturing industry, domestic firms work hard to serve a populace that is increasingly focused on health and quality. One theme that was hit several times was a focus on proof of quality: Vietnamese consumers vastly prefer food that can be proved to be produced in a safe manner. Just take a look at the outfits that we wore while visiting Veeteq, a farm focused on healthy produce!

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Takeaway 2: The communist government operates in an opaque and glacially slow fashion, unless it sees politically relevant reasons to expedite processes.

While the general populace seems mostly unaffected by the government (one tour guide had no idea Vietnam was a communist country and income tax payers are estimated to be south of 10%), many foreign nationals can quickly become frustrated by the inability to proceed without a local fixer, who generally has to grease the right hands. Building a business without a strong consumer presence can be dangerous, as it could easily be suddenly ruled illegal – B2C firms, however, could be slightly better off, due to the active and relatively free press. One story in particular that seemed to demonstrate the government’s motivations: after Rex Tillerson was nominated to Secretary of State, ExxonMobil was suddenly granted permission to drill in an offshore oilfield after years of negotiations.

Takeaway 3: Vietnam has developed transportation solutions that uniquely suit both the needs of the individual cities and the overall country.

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A constant presence in Vietnam is motorbikes. Roads: motorbikes. Sidewalks: motorbikes. Most shops: motorbikes. Factories at closing time: veritable seas of motorbikes flowing out. An especially poignant question was asked during the meeting with the American Chamber of Commerce in Hanoi: what technological progress will have a similar effect on Vietnam as the motorbike? After thinking for about a minute, the chairman of the committee couldn’t come up with a single advancement that would have anywhere near the impact of the motorbike, which had opened up opportunities and connections so widely.

A similar issue existed in the trek from Saigon to Hanoi. At first, many of my classmates wondered why we were taking a 1.5 hour flight rather than what we suspected would be a quick bus ride. Turns out that the bus would have been nearly 25 hours due to poor roads and rough terrain. Once again, technology came to the rescue: every hour on the hour, multiple airlines are flying large planes (747s, A380s) back and forth from Vietnam’s two main cities. Both these solutions prove that the Vietnamese are practical above all and perfectly willing to find the best (if not the most traditional!) method to move both the society and economy forward.

Well, that’s a wrap for me! Time to start preparing for my next Global Immersion class: Family Business in Nordic Europe. Cam on (thanks) for following along!

Taking Tunisia Home

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It’s been a week since we returned from Tunisia and I’ve had some time to ruminate over what we saw during our time in country. If I were to distill what I observed over the week into one sentiment it would be empathy for the country, which has so much potential to be a regional leader yet is very much haunted by three terror attacks in 2015.

I was truly convinced during our visit that Tunisia has the potential and is well positioned to be a regional leader — it has a booming entrepreneurial scene in Tunis; quality exports shipped across the region, to Europe, and to the U.S.; and tremendous natural and cultural beauty that should attract tourists. Yet the country’s reputation has been severely damaged, which understandably detracts tourists and investors alike. Exporting crops (like olive oil) and manufactured products (like paper goods) are the only industries that we observed that are not hurt by the recent wave of terror in the country.

What will it take for the country to recover from the three attacks — two of which explicitly targeted tourists? Perhaps it will just take time, or perhaps the country’s tech entrepreneurs or quality produce (often sold around the globe under the label Italian) will begin to rewrite the country’s story in a more favorable light.

An U.S. embassy official told us that when he brings potential investors to visit the country it has just one shot to appear ripe for investment — they won’t come back for a second time if they don’t like what they see on their first visit. I found this to be disheartening, and am hopeful that as a professional I will strive to see more of a market and its story than these fly-in, fly-out investors. AfricInvest, a private equity group which hosted us for a significant portion of our business told us that their key to success is that most of their investment team lives locally. If I take away nothing else from the trip, it will be that in order to be successful working in a market like Tunisia, a superficial quick trip will not show me the real potential of a country. I’ll need to invest time and dig deeper.

-Zoe Fox ’17

Global Immersion Tunisia

East Asia: Revisited

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Photo Credit: Katherine Li ’17

I entered the Chazen Hong Kong & South Korea trip excited about the opportunity to explore a somewhat familiar industry in a completely unfamiliar place. And we did just that. In our amazing, motley crew of 30 students, we heard from trailblazers in the media, arts and entertainment space. From tech executives who shared their vision for connecting the next generation of consumers to famed news anchors who opened up about how they maintain journalistic integrity while running a profitable business, we got a candid look at the east Asian marketplace. The topics we once learned about in coffee chats and trade rags, were now tangible. We no longer had to read about the trends, we were with the decision-makers driving them. It was that experience that was truly invaluable.

While I was proud to leave the trip with deeper insights around the challenges studios face in getting movies into China and the hurdles digital music services encounter when acquiring customers across borders, for example, my biggest lessons of all boil down to perspective. It’s easy to be U.S.-centric and think about how to take advantage of this “all about Asia” wave as American companies focus their sights abroad, but it’s more important to truly dive into why these markets are deemed so valuable in the first place. There are so many unique cultural, economic and political insights to be uncovered that can make businesses and business leaders in any country more innovative and effective.

My most important takeaways from the trip all center around three key themes.

  1. Culture is one of our most valuable exports. It’s easy to forget that our culture creates some of the world’s most valuable products. The music we love, the movies we watch and the stories we share are not only entertaining, but how we connect with the world. The ability to harness the power of that connection is the foundation of media and entertainment industries all across the globe. Seeing the enormous growth of the Korean wave (“hallyu” 한류) and the opportunities it has created for the economy are direct proof of that. While automotive exports may generate over $60B in value, the phenomenon of Korean entertainment and pop culture has brought bringing pop music, TV dramas and movies to masses and an enormous opportunity for the Korea economy.
  2. Everything can be branded. Even with a background in advertising, I have taken for granted the depths at which consumers connect with brands. Our visit to S.M. Entertainment, however, brought this insight to another level. The team known as “the company that created K-Pop”, is not only a record label and talent agency, but a branding juggernaut. In the States, kids may have had a Justin Bieber backpack or a One Direction lunch box, but in Korea, consumers are drinking Girls Generation white ale and paying a premium to eat Red Velvet red velvet cupcakes. The sophistication with which Korean companies approach branding easily eclipses what we have seen in the U.S. It is an enlightening reminder of the ways in which American brands can think outside the box to create unique and compelling lifestyle experiences for their customers, far beyond what is expected.
  3. Localization is everything. East Asia is a rich and complex economic environment and each country, region and city has their own unique culture, norms and beliefs. Acknowledging, respecting and investing in that is the only way outsiders can even have a shot a piece of the pie. As students we are easily seduced by flashy global brands, but a closer examination of strong, local players could give us even more insight into how to create new opportunities to drive growth and profitability for any business in which we may operate. Our visit to KKBOX proved just that. Most of us could easily talk about Spotify’s scale or Apple’s network effects, but KKBOX showed us how truly thinking local can not only drive revenue, but also create new business opportunities. While U.S. players may rely on recurring credit card payments, for example, KKBOX recognized that they could acquire more diverse customers with a wider range of payment options. Their partnership with local telcos, peer-to-peer communities, and even convenience stores are a prime example of this idea of local innovation that we could translate into all markets.

So while I was sad to see our trip come to an end, I feel lucky to know that I got far more out of this experience than I could have ever imagined. I have tangible lessons about global businesses, and the media and entertainment space more specifically, that I can directly apply to my career as I prepare to leave CBS this spring. The greatest gift though, as I think all of us could attest, were the relationships we were able to create during our whirlwind ten days abroad. From realizing we didn’t bring enough layers to brave the Korean cold or getting pressured into trying Cantonese chicken feet for the first time, we all had this unique chance to jump outside of our comfort zone, together. Because of that, I have created bonds with people through this incredible shared experience that I will never forget.

Thanks for the memories.

 

Courtney Richardson ‘17

China is different

Over the last 2 weeks, along with 30 classmates and 2 professors I explored China, visiting Beijing, Shanghai, Hangzhou, Hong Kong and Macao. Our trip was centered around technology so in addition to hiking the Great Wall and eating Chinese delicacies like chicken feet we visited 10 of the biggest Internet companies and Venture Capital investors in China. On average, the Internet companies are only about 10 years old but have an astronomical number of users and huge valuations.

The biggest lesson that I took from our company visits is that business in China is different:

1) Chinese companies do not need to go global-

With a middle class of over 250 million people, more than 300 cities with a population of at least 1 million people, and over 800 million Internet users, China is like nowhere else. The local internet population is still under-served so there is a lot of opportunity to grow and no need for Chinese Internet companies to look outside China! Their focus is on making their products more “sticky” (a term we heard multiple times) and bringing more solutions to their existing Chinese consumers.

2) The big internet companies are so large that they do everything at once-

We observed that as Chinese internet companies grow, their growth does not follow that of internet companies elsewhere and it is difficult to pinpoint what their main business is.  For instance, the food delivery company that we visited called Meituan started off as a coupon website similar to Groupon, but it now also does coupons and restaurant ratings similar to Yelp, food delivery like Grub Hub and it is also a search engine like Google. The stories of Alibaba and Baidu are strikingly similar to this.  Baidu went from a search engine to food delivery. Alibaba has recently gone from e-commerce into the gaming industry.

These companies were able to do this because they typically did not face much competition in their early years and they were able to raise so much capital that when faced with the question of how to expand they looked at different business verticals instead of looking outside China. I also noted that although none of them is profitable and that even though their margins are a fraction of similar US businesses (food delivery margins in China are a tenth of US food delivery companies) they are focused solely on volumes, which I guess is what counts with that population.

China’s market is so big that it stifles its companies looking outside of China.

3) Chinese companies do not have counterparts outside of China-

Contrary to what I had heard before my visit, Alibaba is not the eBay of ChinaJD.com is not the Amazon of China and Didi is not the Uber of China. While the tech may be similar, the details of their operations are completely different to the US and I was impressed to see how much they are innovating and devoting to R&D. They are not just copying from the west.  One company we visited, a subsidiary of Alibaba called Ant Financial has spent close to $250 million developing technology for anti-fraud transactions and is the first company to successfully develop facial recognition and retinal recognition technology that can be used for everyday transactions. They showed us a demonstration and it was effortless!

3.1) This was one example of China becoming a leader in tech advancements especially in Artificial Intelligence. We were informed that close to 50% of all research papers on Artificial Intelligence in 2016 came from Chinese researchers. I am not surprised because in every city that we visited, our tour guide was quick to point out the universities and to mention how many of the top 10 universities in China were in that city. With such a strong talent pool and money at their disposal, Chinese companies are investing heavily in R&D. I left China convinced that Chinese companies will definitely be responsible for a bigger proportion of the technological advancements of the next 10 years.

3.2) China is the real home of BIG DATA.

Before visiting China, I constantly heard of the term ‘Big data’ but until now I did not have a real appreciation for what it is.  The companies that we visited, especially Tencent and JD.com have the real “BIG DATA”.  They are able to collect so much data on their hundreds of millions of unique users from where they eat and shop, how they bank and how they spend on electricity.  To put big data in perspective, Ant Financial the digital finance company that I mentioned earlier, has more than 500 million users, which is almost 10 times the level of the biggest banks in the world. This gives them access to a huge volume of information on default rates, which in turn will allow them to make more informed credit decisions than traditional banks.  Interestingly, my group was curious to know if the government had access to this data but when we asked this question it was intentionally not answered.  Either way, with the size of data available to Chinese Internet companies, it will be fascinating to see if they utilize it to become the leaders in the BIG DATA age.

4) I observed no signs of a slowdown in the Chinese economy.

I had read that the Chinese economy slowed from nearly 8% to 6% growth but I did not see anything like this. That could be because people have become wealthy in such a short space of time. In the last 10 years, GDP per capita has increased from ~$2k to ~$9k. You can see it everywhere with luxury retail brands, the dining out culture, the smartphones and the hundreds of Porsche’s and Audi’s that I have seen people driving. The Chinese middle class is not slowing down and the bottom line of all of the companies that we visited also does not seem to be affected. They continue to invest and are chasing phenomenal growth rates.

5) “There is an entrepreneurial hunger in China like nowhere else.” These were the wise words of the founder of China’s biggest VC, Qining Ventures. He said to us that in the US, there is a lot of innovation but in China there is entrepreneurial hunger, which the Chinese government is fueling by funding and backing early stage startups. It was self-evident everywhere we visited and is a practice that I have read the Nigerian government, is trying to replicate.

Bankole Cardoso ’18

Chazen China Tech/Innovation Study Tour

 

The Other Middle Eastern Oil Export: Discovering Tunisian Olive Oil

Moulins Mahjoub 1.jpgEarly in the fall, my study group for Global Immersion: Doing Business in North Africa made the somewhat serendipitous decision to study the Tunisian olive oil industry for our term project. We made this choice with little information — other than that olive oil is Tunisia’s largest export and that the industry is the country’s largest employer — but I couldn’t be happier that we got to spend the trip taking a deeper look at olive oil.

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On Wednesday, we spent the day at Les Moulins Mahjoub, a 70-year-old, family-owned olive oil producer about an hour outside of Tunis. Despite being a relatively small producer of 200,000 liters per year with no intention of increasing its outputs, there’s a good chance you’ve tried Les Moulins Mahjoub’s products, available in the U.S. at Whole Foods and as the house brand at Le Pain Quotidien. Now in its third generation, the business is co-owned by three brothers and seven sisters. One of the brothers, Abdel-Majid Mahjoub, who serves as the general manager, gave us a tour of the production press, explaining to us the cold press process, which still very closely resembles the ancient process.

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Les Moulins Mahjoub has no intention of increasing its production because it is happy with its position as an upscale, boutique producer.  It has no intention of competing with Bertolli, or of providing unbranded liters to European producers who will blend it with Spanish or Italian oil. Roughly 90 percent of Les Moulins Mahjoub’s oil is sold under its own brand, although the remaining 10 percent is sold under the brand (or in the case of Le Pain Quotidien, co-brand) of select partners. The company also sells Tunisia condiments, including its top product by volume, Harissa, which has recently exploded in global popularity.

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The highlight of the visit, which served as a microcosm for the industry overall, was eating lunch prepared by the family in their tasting room. We enjoyed olives and spreads, as well as numerous Tunisian dishes ranging from the familiar, shakshuka and cous cous, to the unfamiliar, breadcrumbs mixed with preserved lemons, garlic, harissa, and chickpeas prepared in broth. The third-story tasting room provided aerial views of the olive groves and farmland, which stretched into mountains in the horizon, a surprisingly beautiful setting reminiscent of Californian wine country.

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Despite its premium product, Tunisian olive oil faces two challenges in its luxury positioning: first, there’s a lot of olive oil labeled as extra virgin that isn’t in fact extra virgin; second, Tunisian olive oil lacks the brand recognition of olive oil from countries like Italy and Spain. Tunisia was featured at New York’s Fancy Food Show this year, suggesting the beginning of its improved global recognition, but there’s still a ways to go. After sampling numerous brands of Tunisian oil and spending a day at Les Moulins Mahjoub, Tunisian olive oil gained another 30 brand ambassadors in our class.

-Zoe Fox ’17

Global Immersion: Doing Business in North Africa

More Questions than Answers

Adam Norris ‘17

Cuba is a truly fascinating place. Our tour guide said you can never really learn about Cuba from books or news articles, and I have to agree with her. During my week in Cuba with CBS, I learned a lot about the way Cuba operates and began to understand how the Cuban people live under communism. I also was reminded that the US embargo has barred US investment in Cuban for the past 50 years, but not other developed nations, meaning if/when the embargo is lifted, it is important to learn from the experiences of those investments as Cuba is not an untapped market ripe for American investor conquest.

In the end, I still have many unanswered questions, but here are the top things I will be sure to think about before ever attempting to do business in Cuba, or in any future business venture when I graduate.

What are the results of a communist government on the people? On the whole, government programs in Cuba are well funded, well executed, and provide a lot of benefit to the people. Throughout my trip, it was clear there were high education rates, ample access to healthcare, and very low levels of homelessness, poverty, and crime. Even so, the government is responsible for setting wages and prices, meaning goods and services aren’t priced at their utility value. This raises the question of where this value (and more specifically profit) ends up.

What is the importance of Russia on Cuban international relations before the Special Period and today? Up through 1991, Russia was the largest financial supporter of Cuba, providing most of the necessary exports to the island. Russia is no longer able to support Cuba in this way, but the diplomatic relationships communist Russia facilitated have allowed Cuba to develop trade partners far beyond any other Caribbean nation.

Does the Cuban government actually want the US to fully repeal the trade embargo? In the post-revolution/Cold War era, it is possible that Cuba’s alliance with Russia was fueled by a mutual enemy in the United States. While the Cuban people undoubtedly want the embargo repealed, the US serves as an easy scapegoat for Castro’s government whenever the need arises.

How do Cubans afford $3 drinks at bars on salaries of <$200/month? With most of the Cuban population working for state-owned or state-run entities, salaries are modest. Being that this is the case, it seems unlikely Cubans are able to earn enough money to afford luxuries we (in the US) take for granted like going out to dinner or drinks. Even so, we frequently saw locals out at the bars and restaurants, begging the question of where this money is coming from (remittances, black market businesses, or elsewhere).

In conclusion, I would highly recommend the GIP Cuba course to anyone who is interested in thinking about everyday life in a different way than the developed world. Not only were the speakers interesting and the trip expertly planned, but the lifelong friends I made from CBS on this trip reiterated why I chose CBS for my MBA in the first place.

Hong Kong or Bust

Kicking off the new year in Hong Kong was nothing short of amazing. We finally left the cold weather behind in Seoul to traipse around the bustling (and finally warm) Hong Kong city center.

We started our HK leg of our trip with a tram party on what is colloquially referred to as a ding ding. These double decker vehicles are one of the oldest forms of public transportation in the city, and we had one all to ourselves. Equipped with snacks and playlists provided by KKBOX (more on them later) we rode around the city in style, getting a lay of the land.

 

After the tram party, we darted off to see the famed Symphony of Lights at night in Victoria Harbour. The multimedia light and laser show features synchronized music and narration that celebrates to spirit of the city. More than that, it is an impressive collaboration of more than 40 businesses who work together to project the show from their buildings on both sides of the harbor.

 

The rest of our Hong Kong leg was spent exploring the city and getting the inside scoop on east Asian music, film, arts and culture from a series of phenomenal company visits.

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We visited Eaton House, a co-working space in Central, to meet with Winnie from KKBOX, Asia’s leading digital music subscription service. She spoke about how the Taiwan-based company maintains their competitive advantage against global megabrands like Spotify by creating unique delivery methods and leveraging local industry relationships. By utilizing a wide range of payment methods including telecom partnerships, top-up cards at local convenience stores and e-vouchers, we saw how KKBOX is able to acquire consumers in ways many U.S.-based companies have yet to explore.

Later we visited Eslite, one of the largest retail bookstore chains in Asia. The Taiwan-based company carries the biggest selection of English language publications in the region and has also established itself as a cultural space where books, visual and performing arts, design, coffee, and people come together. We saw firsthand how the company creates unique spaces within the multi-level store to connect consumers to niche local products and brands far beyond books. From tea makers and chocolatiers to cosmetics brands and leather goods makers, Eslite houses distinct brand spaces that encourage visitors to explore and interact with new brands that reflect their identities.

Our final company visit, and probably the most anticipated of the trip, was at Sony Pictures China. There, we met with senior leadership from the Production, Research and International Distribution teams who gave us their candid evaluation of the Chinese film business, the opportunities it presents and how they are approaching the business at Sony. From the quota system and co-productions to the ratings system and blackout dates, the Sony team gave us what felt like a Chinese Film 101, exposing the complexities of this growing entertainment market. While we all knew the world is watching the Chinese movie market, we were surprised to see how complex entry into the space really is and particularly how U.S. brands have to roll the dice a bit to succeed.

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All in all, our Hong Kong office visits were a whirlwind, but undoubtedly left us all with a new perspective on the business of music, arts and entertainment. While we objectively learned about the East Asian entertainment space, I think we all took home more than we expected that we can apply to our home countries and careers, wherever they may be. More to come on my key takeaways from the trip.

 

Courtney Richardson ’17

Chazen Seoul & Hong Kong