International Residency Provides MOT Students Unique, Inside Look at Global Commerce | Technological Leadership Institute
“If you don’t realize that we now exist in a global marketplace that every day is more tied together than the day prior, then you’re missing the boat on how the world is evolving.”
— Carl Kime, instructor of the International Management of Technology Project (IMTP) course at the Technological Leadership Institute.
For the past decade, Carl Kime has been taking second-year Management of Technology (MOT) students half-way around the world for a two-week, eye-opening, agenda-packed international residency. For many MOT students, the IMTP course is the highlight of the program. The goal is to provide international relevance to what they have learned in the classroom and help them reflect about themselves, their current companies and roles, and their future in an international context. The group visits as many as five companies or organizations a day, and participate in lectures and discussions with government officials, company executives and university faculty.
“We strive to make the meetings focused on technology issues and the business of creating, marketing and using technology for profit, jobs and wealth,” said Kime. “All of our meetings from the embassy to entrepreneurs to universities are focused on ‘how do I do better business’ from a global perspective. If you want to be effective as a business leader, you need to have some appreciation for what interacting in the global economy really means.”
To enhance the experience, the trip features stops in both a developed and an emerging-market nation. Just a few weeks ago, the class of 2017, led by Kime and MOT Director of Graduate Studies, Dr. Tariq Samad, visited cities in both China and Singapore.
“I intentionally choose two countries where they’re going to be exposed to cultures, smells, sounds and things that are very different,” said Kime. “We do this to draw a juxtaposition, and students learn exponentially more by thinking about what makes two places so different.”
“Seeing different countries and how others are living is very eye opening,” said Emily Palk, a student in the MOT 2017 cohort. “On the business side of things, I do business with different countries so it was good to learn about Asia, which has a lot of potential and technology coming up.”
Each student returned with a new perspective and understanding of the global market that will benefit not only themselves, but their employers as well. While the knowledge gained was endless, Dr. Samad shared the top four insights he gained from this year’s trip.
- From low-cost manufacturing to an innovation economy
China is no longer a low-cost manufacturing location. Labor-intensive manufacturing is rapidly leaving China for Vietnam, Cambodia, and Myanmar (the latest low-cost destination). To put numbers behind this trend, over the past decade, baseline manufacturing salaries in China have risen from $100 to $500 per month, but they are at $100 per month now in Myanmar. One market report forecasts that in 2018 manufacturing cost in China will be at a par with the U.S.
In response to these developments, the Chinese government is intent on transforming the country into an innovation powerhouse. A “Made in China 2025” initiative has been launched, with 10 priority industry sectors identified for Chinese investment and leadership. These include transportation (aviation, rail, marine and electric vehicles), robotics and control for advanced manufacturing, agricultural machinery and technology, biopharmaceuticals and high-end medical equipment, and next-generation information technology. These prioritized sectors represent opportunities for U.S. companies, but China is also intent on expanding its technology base in these areas. We were told that we can expect a sharp increase in Chinese acquisition of foreign technology; indeed, recent Western companies acquired include GE Appliances, Ingram Micro and the German robotics maker Kuka.
Aggressive efforts to create a start-up culture are also under way. More than two-thousand incubators have been set up, the vast majority of them supported by the government. Accelerators have also been launched, and at least one has the specific objective of helping U.S. companies reach Chinese investors and markets.
Intellectual property rights are being revamped. China’s patent law is being rewritten for the third time in 10 years. Foreign companies are having increasing success with intellectual property lawsuits in Chinese courts, especially as plaintiffs. By filing suit, companies can control the jurisdiction instead of having to defend a suit filed by a local company in its local area. IP remains an area of concern, but it was pointed out to us that this has been the case for over 100 years — a letter to the editor from the U.S. Commercial Attaché in China to a local newspaper in 1915 complained about patent protection practices!
- The explosion of mobile and e-commerce
On “Singles’ Day,” November 11 (11/11), online shopping in China reaches a level not seen anywhere else in the world. In 2016, Chinese consumers spent USD $17.8 billion, up from $14.3 billion the year before. By contrast, 2016 Black Friday and Cyber Monday sales in the U.S. were less than $3.5 billion each. Well over half a billion online orders were generated through the two principal channels, Alibaba’s Tmall and Taobao (Amazon’s market share is marginal).
Interestingly, and representative of another trend, 82 percent of these orders were on mobile platforms. 800 million Chinese own smartphones and more than half of them are active shoppers on Tmall. One “super-app” that has become all the rage is WeChat, which has about one billion active users and integrates e-payments, text messaging, games, location services and more (including business services). One U.S. expat told us that she rarely leaves her WeChat app.
Mobile e-payments are, in fact, commonplace. We saw people paying their restaurant bills and taxi fares with their smartphones. Several applications are available. Alibaba’s Alipay is the most popular, with WeChat’s Wallet growing rapidly. Credit cards are rarely used. A credit scoring system is being developed for consumers — we heard that factors include how many hours of video games the applicant plays and what her/his friends’ credit scores are!
Credit is hard to come by for businesses, too. This creates challenges for direct sales and accounts receivables, with many foreign companies opting for local distribution channels. Transactions are based on relationships and trust, not legal contracts, and networks have sprung up to help suppliers, distributors, investors, etc. get connected.
- Societal changes and challenges
China has now officially loosened its “one-child” policy, but the policy was in place for more than 35 years and its demographic impact will be felt for decades. The elderly population is increasing disproportionately and will continue to do so. A government think tank predicts that by 2030 China will be the world’s most aged society, overtaking Japan.
The ramifications of the demographic shift are manifold. One hears about how the youth, especially men, are “spoilt.” One leader at an accelerator we talked to noted that the most of the founders they encounter are women.
The labor market is tight, especially for experienced staff. Employers have to contend with high attrition rates (these have come down over the last year or so but are still well more than 10 percent annually). Benefits overhead is high as well, perhaps twice as high a rate as in many Western countries. Furthermore, 30 to 50 percent salary increases are not atypical when switching jobs.
Health, energy and environment are major concerns for the people, and the government realizes these have to be addressed. China is attempting to transition from polluting industries to services. Many manufacturing and printing plants have been moved out of cities, but it is difficult and expensive to buy a car in a city like Shanghai, and mayors of cities now have targets set by the central government for pollution and healthcare. However, economic growth is also a priority, and how these conflicting demands will be managed remains to be seen.
- New paths to reaching the world
An intriguing strategy that many of us had not heard about before our trip is the “One Belt One Road” development. China is leading a large-scale infrastructure program that will connect it to the rest of Asia, parts of Africa and Europe. New maritime, rail and road routes are being developed in partnership with many countries.
The rail element is especially noteworthy. The “New Silk Road,” just launched in January 2017, directly connects China with Europe through central Asia and all the way to London. This route cuts 15 days off transportation via the sea and will be much cheaper than air freight. There’s even talk of high-speed cargo trains that will connect China and Europe in two days flat.
As a final note, a subtext behind these reflections and learnings is that the government is a major presence in all facets of Chinese life and business. Policy and legislation are obviously prominent in this context, but the role of government goes further. For many companies in China, the Chinese government is also the largest client. The speed at which changes can occur is also striking; new rules can be issued and put in force with little or no advance notice or open discussion.
It was a fascinating trip, and we’ll see what further dramatic developments have occurred in this complex, dynamic and rapidly evolving country when we take next year’s class to China in early 2018!
If you would like to learn more about how IMTP and a Master of Science in Management of Technology from the Technological Leadership Institute can benefit your career, attend an upcoming information session or contact our admission department.