Embed Size (px)
DESCRIPTION
part 7: Global entrepreneurship class - culture
Citation preview
Global EntrepreneurshipDeveloping Global Mindset for Entrepreneurs
Brian David Butler
TeachingBrian Butler is currently a professor with Forum-Nexus which is co-sponsored by the IQS Business School of the Ramon Llull University in Barcelona and the Catholic University of Milan He teaches classes on International Finance and Global Entrepreneurship in Europe every July and January
In Miami Brian has taught Finance Economics and Global Trade at Thunderbirdrsquos Global MBA program in Miami
He previously worked as a research analyst at the Columbia University Business School in New York City
brianbutlerforum-nexuscombriandbutlergmailcomLinkedInbriandbutlerSkype briandbutler
Brian David Butler
InternationalA global citizen Brian was born in Canada raised in Switzerland (where he attended international British school) educated through university in the US started his career with a Japanese company moved to New York to work as an analyst married a Brazilian and has traveled extensively in Latin America Asia Europe and North America
Brian currently lives in Recife Brazil where he is teaching classes on ldquoGlobal Entrepreneurshiprdquo at the university ldquoFaculdade Boa Viagemrdquo
brianbutlerforum-nexuscombriandbutlergmailcomLinkedInbriandbutlerSkype briandbutler
Brian ButlerFounder of ldquoKookyPlancomrdquo ndash the wiki for Entrepreneurs
Exam
Review ndash gradesnext week (sorry)
Schedule for today
1 Entrepreneurship ideas2 Cross-cultural issues for Global
Entrepreneurs3 Homework review4 International IQ
Greece ndash whats happening
New Ideas
What new business ideasbullDiscusshellip
bull+1 point for participation grade for students with original ideas (not previously discussed in class)
bull Include 3-questions analysis of ideaWhat problem What trend What
transferrable (so start with idea then use 3 questions to evaluate)
Mine water cup ndash airports ndash transfer from Brazil Problem is price size Trend is economic crisis
Also curious
bullWho works with family businessbullWhat are your plans after graduation
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 7Saturday May 22nd 2010bullCross cultural issues for
Global entrepreneurs
Why study Culture
bullMarket entrybullPESTbullInternational business JOBS (FUTURE)bullGlobal citizen
Rather than a ldquolaundry listrdquo
bullBetter to develop a framework for analyzing cultural differences
bullRather than trying to memorize cultural differences for each and ever possible culture you might encounter (French German Italianhellip too difficult)
bullGoal ndash develop skills of HOW to look for cultural clues using a framework for analyzing culture
Preview of upcoming lectures
Cross cultural lessons will be useful when talking about
1 Using outsourcing to build global teams (4hww)
2 Global collaboration crowd sourcing3 Clusters entrepreneurship and
development
Examples to discuss
bullForum-Nexus Study AbroadExample with teachers ndash American vs
Italian Relation with students
Your own examples
bullIn class assignmentWith a partner discuss an instance of
cultural misunderstanding that has personally happened to you Could this misunderstand have been avoided How
Take 5 minutes to discuss1 person will present to the classhellip
Cultural Orientation Index
COI
Cultural Orientations Indicator- COI
NOTE
bullOne thing we need to remember is that cultures are never exclusively one or the other cultures will likely be one and the other but with a clear tendency toward one of these two extremes
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Handouts emails
1 Culture Summary document- Dimensions Orientations
2 Excel spreadsheet ndash COI comparison of Canada USA Mexico
Mini case studies
bullSee other slides bullUse other projectorhellip
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Brian David Butler
TeachingBrian Butler is currently a professor with Forum-Nexus which is co-sponsored by the IQS Business School of the Ramon Llull University in Barcelona and the Catholic University of Milan He teaches classes on International Finance and Global Entrepreneurship in Europe every July and January
In Miami Brian has taught Finance Economics and Global Trade at Thunderbirdrsquos Global MBA program in Miami
He previously worked as a research analyst at the Columbia University Business School in New York City
brianbutlerforum-nexuscombriandbutlergmailcomLinkedInbriandbutlerSkype briandbutler
Brian David Butler
InternationalA global citizen Brian was born in Canada raised in Switzerland (where he attended international British school) educated through university in the US started his career with a Japanese company moved to New York to work as an analyst married a Brazilian and has traveled extensively in Latin America Asia Europe and North America
Brian currently lives in Recife Brazil where he is teaching classes on ldquoGlobal Entrepreneurshiprdquo at the university ldquoFaculdade Boa Viagemrdquo
brianbutlerforum-nexuscombriandbutlergmailcomLinkedInbriandbutlerSkype briandbutler
Brian ButlerFounder of ldquoKookyPlancomrdquo ndash the wiki for Entrepreneurs
Exam
Review ndash gradesnext week (sorry)
Schedule for today
1 Entrepreneurship ideas2 Cross-cultural issues for Global
Entrepreneurs3 Homework review4 International IQ
Greece ndash whats happening
New Ideas
What new business ideasbullDiscusshellip
bull+1 point for participation grade for students with original ideas (not previously discussed in class)
bull Include 3-questions analysis of ideaWhat problem What trend What
transferrable (so start with idea then use 3 questions to evaluate)
Mine water cup ndash airports ndash transfer from Brazil Problem is price size Trend is economic crisis
Also curious
bullWho works with family businessbullWhat are your plans after graduation
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 7Saturday May 22nd 2010bullCross cultural issues for
Global entrepreneurs
Why study Culture
bullMarket entrybullPESTbullInternational business JOBS (FUTURE)bullGlobal citizen
Rather than a ldquolaundry listrdquo
bullBetter to develop a framework for analyzing cultural differences
bullRather than trying to memorize cultural differences for each and ever possible culture you might encounter (French German Italianhellip too difficult)
bullGoal ndash develop skills of HOW to look for cultural clues using a framework for analyzing culture
Preview of upcoming lectures
Cross cultural lessons will be useful when talking about
1 Using outsourcing to build global teams (4hww)
2 Global collaboration crowd sourcing3 Clusters entrepreneurship and
development
Examples to discuss
bullForum-Nexus Study AbroadExample with teachers ndash American vs
Italian Relation with students
Your own examples
bullIn class assignmentWith a partner discuss an instance of
cultural misunderstanding that has personally happened to you Could this misunderstand have been avoided How
Take 5 minutes to discuss1 person will present to the classhellip
Cultural Orientation Index
COI
Cultural Orientations Indicator- COI
NOTE
bullOne thing we need to remember is that cultures are never exclusively one or the other cultures will likely be one and the other but with a clear tendency toward one of these two extremes
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Handouts emails
1 Culture Summary document- Dimensions Orientations
2 Excel spreadsheet ndash COI comparison of Canada USA Mexico
Mini case studies
bullSee other slides bullUse other projectorhellip
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Brian David Butler
InternationalA global citizen Brian was born in Canada raised in Switzerland (where he attended international British school) educated through university in the US started his career with a Japanese company moved to New York to work as an analyst married a Brazilian and has traveled extensively in Latin America Asia Europe and North America
Brian currently lives in Recife Brazil where he is teaching classes on ldquoGlobal Entrepreneurshiprdquo at the university ldquoFaculdade Boa Viagemrdquo
brianbutlerforum-nexuscombriandbutlergmailcomLinkedInbriandbutlerSkype briandbutler
Brian ButlerFounder of ldquoKookyPlancomrdquo ndash the wiki for Entrepreneurs
Exam
Review ndash gradesnext week (sorry)
Schedule for today
1 Entrepreneurship ideas2 Cross-cultural issues for Global
Entrepreneurs3 Homework review4 International IQ
Greece ndash whats happening
New Ideas
What new business ideasbullDiscusshellip
bull+1 point for participation grade for students with original ideas (not previously discussed in class)
bull Include 3-questions analysis of ideaWhat problem What trend What
transferrable (so start with idea then use 3 questions to evaluate)
Mine water cup ndash airports ndash transfer from Brazil Problem is price size Trend is economic crisis
Also curious
bullWho works with family businessbullWhat are your plans after graduation
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 7Saturday May 22nd 2010bullCross cultural issues for
Global entrepreneurs
Why study Culture
bullMarket entrybullPESTbullInternational business JOBS (FUTURE)bullGlobal citizen
Rather than a ldquolaundry listrdquo
bullBetter to develop a framework for analyzing cultural differences
bullRather than trying to memorize cultural differences for each and ever possible culture you might encounter (French German Italianhellip too difficult)
bullGoal ndash develop skills of HOW to look for cultural clues using a framework for analyzing culture
Preview of upcoming lectures
Cross cultural lessons will be useful when talking about
1 Using outsourcing to build global teams (4hww)
2 Global collaboration crowd sourcing3 Clusters entrepreneurship and
development
Examples to discuss
bullForum-Nexus Study AbroadExample with teachers ndash American vs
Italian Relation with students
Your own examples
bullIn class assignmentWith a partner discuss an instance of
cultural misunderstanding that has personally happened to you Could this misunderstand have been avoided How
Take 5 minutes to discuss1 person will present to the classhellip
Cultural Orientation Index
COI
Cultural Orientations Indicator- COI
NOTE
bullOne thing we need to remember is that cultures are never exclusively one or the other cultures will likely be one and the other but with a clear tendency toward one of these two extremes
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Handouts emails
1 Culture Summary document- Dimensions Orientations
2 Excel spreadsheet ndash COI comparison of Canada USA Mexico
Mini case studies
bullSee other slides bullUse other projectorhellip
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Brian ButlerFounder of ldquoKookyPlancomrdquo ndash the wiki for Entrepreneurs
Exam
Review ndash gradesnext week (sorry)
Schedule for today
1 Entrepreneurship ideas2 Cross-cultural issues for Global
Entrepreneurs3 Homework review4 International IQ
Greece ndash whats happening
New Ideas
What new business ideasbullDiscusshellip
bull+1 point for participation grade for students with original ideas (not previously discussed in class)
bull Include 3-questions analysis of ideaWhat problem What trend What
transferrable (so start with idea then use 3 questions to evaluate)
Mine water cup ndash airports ndash transfer from Brazil Problem is price size Trend is economic crisis
Also curious
bullWho works with family businessbullWhat are your plans after graduation
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 7Saturday May 22nd 2010bullCross cultural issues for
Global entrepreneurs
Why study Culture
bullMarket entrybullPESTbullInternational business JOBS (FUTURE)bullGlobal citizen
Rather than a ldquolaundry listrdquo
bullBetter to develop a framework for analyzing cultural differences
bullRather than trying to memorize cultural differences for each and ever possible culture you might encounter (French German Italianhellip too difficult)
bullGoal ndash develop skills of HOW to look for cultural clues using a framework for analyzing culture
Preview of upcoming lectures
Cross cultural lessons will be useful when talking about
1 Using outsourcing to build global teams (4hww)
2 Global collaboration crowd sourcing3 Clusters entrepreneurship and
development
Examples to discuss
bullForum-Nexus Study AbroadExample with teachers ndash American vs
Italian Relation with students
Your own examples
bullIn class assignmentWith a partner discuss an instance of
cultural misunderstanding that has personally happened to you Could this misunderstand have been avoided How
Take 5 minutes to discuss1 person will present to the classhellip
Cultural Orientation Index
COI
Cultural Orientations Indicator- COI
NOTE
bullOne thing we need to remember is that cultures are never exclusively one or the other cultures will likely be one and the other but with a clear tendency toward one of these two extremes
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Handouts emails
1 Culture Summary document- Dimensions Orientations
2 Excel spreadsheet ndash COI comparison of Canada USA Mexico
Mini case studies
bullSee other slides bullUse other projectorhellip
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Exam
Review ndash gradesnext week (sorry)
Schedule for today
1 Entrepreneurship ideas2 Cross-cultural issues for Global
Entrepreneurs3 Homework review4 International IQ
Greece ndash whats happening
New Ideas
What new business ideasbullDiscusshellip
bull+1 point for participation grade for students with original ideas (not previously discussed in class)
bull Include 3-questions analysis of ideaWhat problem What trend What
transferrable (so start with idea then use 3 questions to evaluate)
Mine water cup ndash airports ndash transfer from Brazil Problem is price size Trend is economic crisis
Also curious
bullWho works with family businessbullWhat are your plans after graduation
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 7Saturday May 22nd 2010bullCross cultural issues for
Global entrepreneurs
Why study Culture
bullMarket entrybullPESTbullInternational business JOBS (FUTURE)bullGlobal citizen
Rather than a ldquolaundry listrdquo
bullBetter to develop a framework for analyzing cultural differences
bullRather than trying to memorize cultural differences for each and ever possible culture you might encounter (French German Italianhellip too difficult)
bullGoal ndash develop skills of HOW to look for cultural clues using a framework for analyzing culture
Preview of upcoming lectures
Cross cultural lessons will be useful when talking about
1 Using outsourcing to build global teams (4hww)
2 Global collaboration crowd sourcing3 Clusters entrepreneurship and
development
Examples to discuss
bullForum-Nexus Study AbroadExample with teachers ndash American vs
Italian Relation with students
Your own examples
bullIn class assignmentWith a partner discuss an instance of
cultural misunderstanding that has personally happened to you Could this misunderstand have been avoided How
Take 5 minutes to discuss1 person will present to the classhellip
Cultural Orientation Index
COI
Cultural Orientations Indicator- COI
NOTE
bullOne thing we need to remember is that cultures are never exclusively one or the other cultures will likely be one and the other but with a clear tendency toward one of these two extremes
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Handouts emails
1 Culture Summary document- Dimensions Orientations
2 Excel spreadsheet ndash COI comparison of Canada USA Mexico
Mini case studies
bullSee other slides bullUse other projectorhellip
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Schedule for today
1 Entrepreneurship ideas2 Cross-cultural issues for Global
Entrepreneurs3 Homework review4 International IQ
Greece ndash whats happening
New Ideas
What new business ideasbullDiscusshellip
bull+1 point for participation grade for students with original ideas (not previously discussed in class)
bull Include 3-questions analysis of ideaWhat problem What trend What
transferrable (so start with idea then use 3 questions to evaluate)
Mine water cup ndash airports ndash transfer from Brazil Problem is price size Trend is economic crisis
Also curious
bullWho works with family businessbullWhat are your plans after graduation
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 7Saturday May 22nd 2010bullCross cultural issues for
Global entrepreneurs
Why study Culture
bullMarket entrybullPESTbullInternational business JOBS (FUTURE)bullGlobal citizen
Rather than a ldquolaundry listrdquo
bullBetter to develop a framework for analyzing cultural differences
bullRather than trying to memorize cultural differences for each and ever possible culture you might encounter (French German Italianhellip too difficult)
bullGoal ndash develop skills of HOW to look for cultural clues using a framework for analyzing culture
Preview of upcoming lectures
Cross cultural lessons will be useful when talking about
1 Using outsourcing to build global teams (4hww)
2 Global collaboration crowd sourcing3 Clusters entrepreneurship and
development
Examples to discuss
bullForum-Nexus Study AbroadExample with teachers ndash American vs
Italian Relation with students
Your own examples
bullIn class assignmentWith a partner discuss an instance of
cultural misunderstanding that has personally happened to you Could this misunderstand have been avoided How
Take 5 minutes to discuss1 person will present to the classhellip
Cultural Orientation Index
COI
Cultural Orientations Indicator- COI
NOTE
bullOne thing we need to remember is that cultures are never exclusively one or the other cultures will likely be one and the other but with a clear tendency toward one of these two extremes
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Handouts emails
1 Culture Summary document- Dimensions Orientations
2 Excel spreadsheet ndash COI comparison of Canada USA Mexico
Mini case studies
bullSee other slides bullUse other projectorhellip
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
New Ideas
What new business ideasbullDiscusshellip
bull+1 point for participation grade for students with original ideas (not previously discussed in class)
bull Include 3-questions analysis of ideaWhat problem What trend What
transferrable (so start with idea then use 3 questions to evaluate)
Mine water cup ndash airports ndash transfer from Brazil Problem is price size Trend is economic crisis
Also curious
bullWho works with family businessbullWhat are your plans after graduation
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 7Saturday May 22nd 2010bullCross cultural issues for
Global entrepreneurs
Why study Culture
bullMarket entrybullPESTbullInternational business JOBS (FUTURE)bullGlobal citizen
Rather than a ldquolaundry listrdquo
bullBetter to develop a framework for analyzing cultural differences
bullRather than trying to memorize cultural differences for each and ever possible culture you might encounter (French German Italianhellip too difficult)
bullGoal ndash develop skills of HOW to look for cultural clues using a framework for analyzing culture
Preview of upcoming lectures
Cross cultural lessons will be useful when talking about
1 Using outsourcing to build global teams (4hww)
2 Global collaboration crowd sourcing3 Clusters entrepreneurship and
development
Examples to discuss
bullForum-Nexus Study AbroadExample with teachers ndash American vs
Italian Relation with students
Your own examples
bullIn class assignmentWith a partner discuss an instance of
cultural misunderstanding that has personally happened to you Could this misunderstand have been avoided How
Take 5 minutes to discuss1 person will present to the classhellip
Cultural Orientation Index
COI
Cultural Orientations Indicator- COI
NOTE
bullOne thing we need to remember is that cultures are never exclusively one or the other cultures will likely be one and the other but with a clear tendency toward one of these two extremes
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Handouts emails
1 Culture Summary document- Dimensions Orientations
2 Excel spreadsheet ndash COI comparison of Canada USA Mexico
Mini case studies
bullSee other slides bullUse other projectorhellip
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
What new business ideasbullDiscusshellip
bull+1 point for participation grade for students with original ideas (not previously discussed in class)
bull Include 3-questions analysis of ideaWhat problem What trend What
transferrable (so start with idea then use 3 questions to evaluate)
Mine water cup ndash airports ndash transfer from Brazil Problem is price size Trend is economic crisis
Also curious
bullWho works with family businessbullWhat are your plans after graduation
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 7Saturday May 22nd 2010bullCross cultural issues for
Global entrepreneurs
Why study Culture
bullMarket entrybullPESTbullInternational business JOBS (FUTURE)bullGlobal citizen
Rather than a ldquolaundry listrdquo
bullBetter to develop a framework for analyzing cultural differences
bullRather than trying to memorize cultural differences for each and ever possible culture you might encounter (French German Italianhellip too difficult)
bullGoal ndash develop skills of HOW to look for cultural clues using a framework for analyzing culture
Preview of upcoming lectures
Cross cultural lessons will be useful when talking about
1 Using outsourcing to build global teams (4hww)
2 Global collaboration crowd sourcing3 Clusters entrepreneurship and
development
Examples to discuss
bullForum-Nexus Study AbroadExample with teachers ndash American vs
Italian Relation with students
Your own examples
bullIn class assignmentWith a partner discuss an instance of
cultural misunderstanding that has personally happened to you Could this misunderstand have been avoided How
Take 5 minutes to discuss1 person will present to the classhellip
Cultural Orientation Index
COI
Cultural Orientations Indicator- COI
NOTE
bullOne thing we need to remember is that cultures are never exclusively one or the other cultures will likely be one and the other but with a clear tendency toward one of these two extremes
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Handouts emails
1 Culture Summary document- Dimensions Orientations
2 Excel spreadsheet ndash COI comparison of Canada USA Mexico
Mini case studies
bullSee other slides bullUse other projectorhellip
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Also curious
bullWho works with family businessbullWhat are your plans after graduation
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 7Saturday May 22nd 2010bullCross cultural issues for
Global entrepreneurs
Why study Culture
bullMarket entrybullPESTbullInternational business JOBS (FUTURE)bullGlobal citizen
Rather than a ldquolaundry listrdquo
bullBetter to develop a framework for analyzing cultural differences
bullRather than trying to memorize cultural differences for each and ever possible culture you might encounter (French German Italianhellip too difficult)
bullGoal ndash develop skills of HOW to look for cultural clues using a framework for analyzing culture
Preview of upcoming lectures
Cross cultural lessons will be useful when talking about
1 Using outsourcing to build global teams (4hww)
2 Global collaboration crowd sourcing3 Clusters entrepreneurship and
development
Examples to discuss
bullForum-Nexus Study AbroadExample with teachers ndash American vs
Italian Relation with students
Your own examples
bullIn class assignmentWith a partner discuss an instance of
cultural misunderstanding that has personally happened to you Could this misunderstand have been avoided How
Take 5 minutes to discuss1 person will present to the classhellip
Cultural Orientation Index
COI
Cultural Orientations Indicator- COI
NOTE
bullOne thing we need to remember is that cultures are never exclusively one or the other cultures will likely be one and the other but with a clear tendency toward one of these two extremes
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Handouts emails
1 Culture Summary document- Dimensions Orientations
2 Excel spreadsheet ndash COI comparison of Canada USA Mexico
Mini case studies
bullSee other slides bullUse other projectorhellip
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Global Entrepreneurship developing the global mindset for entrepreneurs
Class 7Saturday May 22nd 2010bullCross cultural issues for
Global entrepreneurs
Why study Culture
bullMarket entrybullPESTbullInternational business JOBS (FUTURE)bullGlobal citizen
Rather than a ldquolaundry listrdquo
bullBetter to develop a framework for analyzing cultural differences
bullRather than trying to memorize cultural differences for each and ever possible culture you might encounter (French German Italianhellip too difficult)
bullGoal ndash develop skills of HOW to look for cultural clues using a framework for analyzing culture
Preview of upcoming lectures
Cross cultural lessons will be useful when talking about
1 Using outsourcing to build global teams (4hww)
2 Global collaboration crowd sourcing3 Clusters entrepreneurship and
development
Examples to discuss
bullForum-Nexus Study AbroadExample with teachers ndash American vs
Italian Relation with students
Your own examples
bullIn class assignmentWith a partner discuss an instance of
cultural misunderstanding that has personally happened to you Could this misunderstand have been avoided How
Take 5 minutes to discuss1 person will present to the classhellip
Cultural Orientation Index
COI
Cultural Orientations Indicator- COI
NOTE
bullOne thing we need to remember is that cultures are never exclusively one or the other cultures will likely be one and the other but with a clear tendency toward one of these two extremes
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Handouts emails
1 Culture Summary document- Dimensions Orientations
2 Excel spreadsheet ndash COI comparison of Canada USA Mexico
Mini case studies
bullSee other slides bullUse other projectorhellip
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Why study Culture
bullMarket entrybullPESTbullInternational business JOBS (FUTURE)bullGlobal citizen
Rather than a ldquolaundry listrdquo
bullBetter to develop a framework for analyzing cultural differences
bullRather than trying to memorize cultural differences for each and ever possible culture you might encounter (French German Italianhellip too difficult)
bullGoal ndash develop skills of HOW to look for cultural clues using a framework for analyzing culture
Preview of upcoming lectures
Cross cultural lessons will be useful when talking about
1 Using outsourcing to build global teams (4hww)
2 Global collaboration crowd sourcing3 Clusters entrepreneurship and
development
Examples to discuss
bullForum-Nexus Study AbroadExample with teachers ndash American vs
Italian Relation with students
Your own examples
bullIn class assignmentWith a partner discuss an instance of
cultural misunderstanding that has personally happened to you Could this misunderstand have been avoided How
Take 5 minutes to discuss1 person will present to the classhellip
Cultural Orientation Index
COI
Cultural Orientations Indicator- COI
NOTE
bullOne thing we need to remember is that cultures are never exclusively one or the other cultures will likely be one and the other but with a clear tendency toward one of these two extremes
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Handouts emails
1 Culture Summary document- Dimensions Orientations
2 Excel spreadsheet ndash COI comparison of Canada USA Mexico
Mini case studies
bullSee other slides bullUse other projectorhellip
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Rather than a ldquolaundry listrdquo
bullBetter to develop a framework for analyzing cultural differences
bullRather than trying to memorize cultural differences for each and ever possible culture you might encounter (French German Italianhellip too difficult)
bullGoal ndash develop skills of HOW to look for cultural clues using a framework for analyzing culture
Preview of upcoming lectures
Cross cultural lessons will be useful when talking about
1 Using outsourcing to build global teams (4hww)
2 Global collaboration crowd sourcing3 Clusters entrepreneurship and
development
Examples to discuss
bullForum-Nexus Study AbroadExample with teachers ndash American vs
Italian Relation with students
Your own examples
bullIn class assignmentWith a partner discuss an instance of
cultural misunderstanding that has personally happened to you Could this misunderstand have been avoided How
Take 5 minutes to discuss1 person will present to the classhellip
Cultural Orientation Index
COI
Cultural Orientations Indicator- COI
NOTE
bullOne thing we need to remember is that cultures are never exclusively one or the other cultures will likely be one and the other but with a clear tendency toward one of these two extremes
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Handouts emails
1 Culture Summary document- Dimensions Orientations
2 Excel spreadsheet ndash COI comparison of Canada USA Mexico
Mini case studies
bullSee other slides bullUse other projectorhellip
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Preview of upcoming lectures
Cross cultural lessons will be useful when talking about
1 Using outsourcing to build global teams (4hww)
2 Global collaboration crowd sourcing3 Clusters entrepreneurship and
development
Examples to discuss
bullForum-Nexus Study AbroadExample with teachers ndash American vs
Italian Relation with students
Your own examples
bullIn class assignmentWith a partner discuss an instance of
cultural misunderstanding that has personally happened to you Could this misunderstand have been avoided How
Take 5 minutes to discuss1 person will present to the classhellip
Cultural Orientation Index
COI
Cultural Orientations Indicator- COI
NOTE
bullOne thing we need to remember is that cultures are never exclusively one or the other cultures will likely be one and the other but with a clear tendency toward one of these two extremes
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Handouts emails
1 Culture Summary document- Dimensions Orientations
2 Excel spreadsheet ndash COI comparison of Canada USA Mexico
Mini case studies
bullSee other slides bullUse other projectorhellip
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Examples to discuss
bullForum-Nexus Study AbroadExample with teachers ndash American vs
Italian Relation with students
Your own examples
bullIn class assignmentWith a partner discuss an instance of
cultural misunderstanding that has personally happened to you Could this misunderstand have been avoided How
Take 5 minutes to discuss1 person will present to the classhellip
Cultural Orientation Index
COI
Cultural Orientations Indicator- COI
NOTE
bullOne thing we need to remember is that cultures are never exclusively one or the other cultures will likely be one and the other but with a clear tendency toward one of these two extremes
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Handouts emails
1 Culture Summary document- Dimensions Orientations
2 Excel spreadsheet ndash COI comparison of Canada USA Mexico
Mini case studies
bullSee other slides bullUse other projectorhellip
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Your own examples
bullIn class assignmentWith a partner discuss an instance of
cultural misunderstanding that has personally happened to you Could this misunderstand have been avoided How
Take 5 minutes to discuss1 person will present to the classhellip
Cultural Orientation Index
COI
Cultural Orientations Indicator- COI
NOTE
bullOne thing we need to remember is that cultures are never exclusively one or the other cultures will likely be one and the other but with a clear tendency toward one of these two extremes
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Handouts emails
1 Culture Summary document- Dimensions Orientations
2 Excel spreadsheet ndash COI comparison of Canada USA Mexico
Mini case studies
bullSee other slides bullUse other projectorhellip
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Cultural Orientation Index
COI
Cultural Orientations Indicator- COI
NOTE
bullOne thing we need to remember is that cultures are never exclusively one or the other cultures will likely be one and the other but with a clear tendency toward one of these two extremes
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Handouts emails
1 Culture Summary document- Dimensions Orientations
2 Excel spreadsheet ndash COI comparison of Canada USA Mexico
Mini case studies
bullSee other slides bullUse other projectorhellip
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Cultural Orientations Indicator- COI
NOTE
bullOne thing we need to remember is that cultures are never exclusively one or the other cultures will likely be one and the other but with a clear tendency toward one of these two extremes
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Handouts emails
1 Culture Summary document- Dimensions Orientations
2 Excel spreadsheet ndash COI comparison of Canada USA Mexico
Mini case studies
bullSee other slides bullUse other projectorhellip
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
NOTE
bullOne thing we need to remember is that cultures are never exclusively one or the other cultures will likely be one and the other but with a clear tendency toward one of these two extremes
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Handouts emails
1 Culture Summary document- Dimensions Orientations
2 Excel spreadsheet ndash COI comparison of Canada USA Mexico
Mini case studies
bullSee other slides bullUse other projectorhellip
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Handouts emails
1 Culture Summary document- Dimensions Orientations
2 Excel spreadsheet ndash COI comparison of Canada USA Mexico
Mini case studies
bullSee other slides bullUse other projectorhellip
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Handouts emails
1 Culture Summary document- Dimensions Orientations
2 Excel spreadsheet ndash COI comparison of Canada USA Mexico
Mini case studies
bullSee other slides bullUse other projectorhellip
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Mini case studies
bullSee other slides bullUse other projectorhellip
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Resources to learn more
Prof Brian Butlerrsquos notes online httpglobotrendspbworkscomCulture-iss
ues-in-Brazil
bullSourcesThunderbird here Download the PDF raquosee the TMC site here
httpwwwtmcorpcom
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
COI amp Entrepreneurship
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Entrepreneurship and COI
1 Development issue Which cultural traits probably lead to more
entrepreneurship hence more economic development
Which factors are most important for entrepreneurship + level of entrepreneurship in different places
2 Personal issue What style switching should you do to
promote entrepreneurship
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Entrepreneurship and COI
1 Environment Control Not ldquoharmonyrdquo or ldquoconstraintrdquo
2 Time Multifocused ndash versatile adaptation Ability to change project change idea work
on many ideas at same time3 Individualism
Particularistic vs Universalistic better with ldquorules donrsquot apply to merdquo (not constrained)
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Entrepreneurship and COI4 Competitiveness
Competitiveness vs Cooperation Focus on benefits to self leave the group loyal to the group (thinking) Comfortable with competition Desire for self-recognition
5 Flexibility Not ldquoorderrdquo focused Better if likes flexibility innovation adaptation Comfortable with risks Dynamic goals (changing) Problem solving needs flexibility Tolerate unpredictable dissent (Israel)
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Entrepreneurship and COI
6 Thinking Inductive vs Deductive Slight advantage to deductive thought ndash not
constrained by ldquofactrdquo but instead gravitate to grand theories and ldquovisionsrdquo (visionary)
Inductive is better for big-company (systematic process) innovations
Deductive is better for entrepreneurs and big changes
7 Future orientation (time)
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Steps to take
bullOrder 1 Cultural due diligence (COI)2 then gap analysis 3 Develop strategy to minimize negatives
ldquostyle switchingrdquo for results4 Stay alert over time
Stop cultural ldquocruise controlrdquo
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Style switching
bullWho should switch You ThembullConsider
Power relationship Buyer supplier Salesperson purchasing agent Customer client
Who must change Style switch
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
International IQ moment
What is happening in Greece - discussion
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Athens GreeceAthens Greece ndash at the heart of a European Crisis
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Athens Greece
bullWhat is happening in Greece ndash
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Greek economy Euro Zone
Negatives
bull No control of monetary policy
bull Can not devalue currency to regain competitiveness
Positives
bull Low borrowing costs
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Greek economy ndash boom years
httpenwikipediaorgwikiEconomy_of_Greece
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Summary of problem + why importantbull In recent history
First came the global economic crisis 2007-(9)Contraction of credit deleveragingGovernments step up to fill void of missing
consumer demand ndash deficit spending Keynes stimulus
Credit continues to contract ndash less money to go around
Creditors punish weak countries with external funding requirements ndash Greece is 1st in line (but likely not the last)
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
External funding + current accounts
bullLesson from past- current account deficits = dangerous
bullReliance on funding from foreignersbullShort term fundingbullPay off rolling debtsbullBut what happens if funding dries up
This is what happened to Lehman Bros in credit crisis (and Bear Stearns etc)
It is also what happed to Greece
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
National ldquoBalance Sheetrdquo
bull3 Important parts (for our class discussion)
Current accountFlow of goods and services Roughly= exports -
imports
Capital accountPaying for the current account - Money flowsExample US government sells treasury bills
ReservesForeign currency gold etcUsed to finance gap between current amp capital
accountsldquobelow the linerdquo
Martin Wolf book ldquoFixing Global Financerdquo
Must Balance
If deficithellip
pay out reserves
If surplus
Build up reserves
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
National ldquoBalance Sheetrdquo
bullKey must ldquobalancerdquo
If ldquocurrent accountrdquo deficit
thenhellip by definitionhellip
ldquocapital accountrdquo = surplus
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
National ldquoBalance Sheetrdquo
bullGROUP
SohellipIf imports are gt exportshellip what must be happening in the ldquocapital accountrdquo
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Answerhellip
SURPLUS Money must be coming in from abroad to
finance the current account deficits
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
National ldquoBalance Sheetrdquobull Buthellip
What happens if you do NOT have money coming in from abroad
Note just because you have a ldquocurrent accountrdquo deficithellip that doesnrsquot mean foreigners will pay the billhellip
Group assignment What happens What must you do (hint 3rd part of national
accounts mentioned before)hellip
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Answer
You must then dip into the Reserves (if you have any) and pay the differencehellip (gold foreign currency)
Follow up questionWhat if you donrsquot have enough reserves Then what
What can you do
(What happens if you are running a current account deficit and if foreigners SUDDEN STOP supplying capital buthellip you do not have enough reserves to pay the bill)
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Call for help
bullIMFbullOr for Greecehellip call the other Euro
countries and ask for loans
bullButhellip put yourself in the Germans shoeshellip would you want to pour money into Greece if you didnrsquot expect to get the money back Will the Greeks change
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Recent struggles
bullGreek shipping industry was hit hard by the decline in world trade
bullTourism ndash falls 15 of Greeces GDP and a major earner of foreign exchange
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks importing as we
exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
Money came in not from foreigners investing in FDI (as was noted during speech with Metaxa this morning) but instead much $ came in from tourists Tourism = importing capital (capital account surplus) But remember what has to happen if the capital account switches from surplus to deficits The current account must move from deficit to surplus How If currency can devalue (as they are apart of Euro zone)hellip then competitiveness must increase ndash either more efficient or lower wageshellip politically and socially painful process that could take YEARS
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Understanding Greek challenges2 Budget deficits - remember national balance sheet ndash
assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Governments weak short term thinking Difficult to fix structural troubles with budget Need to cut costs But strong unions and impatient democratic voters Politicians that try to raise taxes or cut spending (fire teachers) are thrown out
As opposed to governments in countries like Ireland that have made steps to address difficult structural troubles
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Understanding Greek challengesbull In a macro sensebull Facing 2 deficit challenges1 Current account deficits ndash remember line of trucks
importing as we exited the boat in Greece ndash importing more than exporting So by definitionhellip capital account must be in surplus to pay for current account deficit Importing capital
2 Budget deficits - remember national balance sheet ndash assets (income) and liabilities (spending) For Greece a bit part of income came from tourism which dropped off significantly with the crisis But spending remained ldquotoo highrdquo Structural difficult to bring down
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Fears- Contagion
bullThere are many other countries that are running deficits
bullWhat happens if credits stop fundingbullPIIGS of Europe
Portugal Italy Ireland Greece SpainThreaten to tear apart Euro
bullUS UK are the big ones
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Other countries ndash BIGGER Debts
httpwwweconomistcomworldeuropedisplayStorycfmstory_id=16003661ampsource=most_commented
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Seehellip
bullSee economist article ndash history ndash credit crunch
bullI will send it by email hellip and will discuss next week
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Homework
Sorry
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
Homeworkndash due Wednesday for feedback or at next class
bull Each student is to make their own COI analysisEach factor ndash what type are you
bull Also do a ldquogap analysisrdquo German personDeductive linear doing low-context direct fluid time
single focus competitive equalityCompare your COI with this sample person (German)Which areas do you have the greatest gaps (areas of
potential conflict)What could you do (style switching) to lesson the
potential problems
