The pace of today’s global marketplace continues to accelerate. As individuals and societies continue to become more interconnected through the fast exchange of goods and ideas, businesses must learn to understand and adapt to the nuances of globalization or risk becoming obsolete. Contemporary business students and leaders must not only understand how their domestic enterprises are—or can be—compatible with this fast-growing global network, but they must also be cognizant of the impact of the rise of emerging markets.
At the Sellinger School of Business and Management at Loyola University Maryland, faculty members are leaders in understanding the global economy. Through original research, international field studies, and relationships with business leaders and governments of many backgrounds and cultures, Loyola professors are uniquely well-suited to sharing their expertise and offering suggestions on the significance of the global marketplace and how to adapt to and remain competitive in it.
During the summer, many Sellinger School faculty members take the opportunity to build their global experience through international travel and research and then share their discoveries with students and the business community upon return. In this issue, we check in with three professors in accounting, marketing, and management and international business whose recent international endeavors in Europe, Africa, and South America have explored emerging global issues influencing several disciplines and areas of business.
Alfred Michenzi, Ph.D., professor of accounting, recently returned from a sabbatical focused on learning more about International Finance Reporting Standards, which the Securities and Exchange Commission has proposed adopting in the U.S.
What are some of the challenges of international auditing and financial reporting?
My area of research interest focuses on International Standards on Auditing and then applying that information to help students prepare for the future of the auditing profession. During my spring sabbatical my understanding of international audit and financial reporting standards was enhanced by a 45-hour course designed to upgrade my skills with respect to International Finance Reporting Standards (IFRS). During this time I was engaged in discussions with CPA firms and business organizations in London, the U.K., and in Germany. What I learned is that the landscape is not solid as international accounting and audit standards are in a state of flux. While most nations use the IFRS, each nation applies those standards a bit differently due to various geographical and political conditions. Regimes will modify, change, and adjust their standards to fit their cultures and regulatory statutes.
Meanwhile, the United States uses an entirely different set of accounting standards known as Generally Accepted Accounting Principles (GAAP). While the Securities and Exchange Commission has proposed the domestic use of IRFS, they have not yet been adopted as the standard in the U.S. As a result, we need to remain cognizant of what is under discussion and be mindful that any new regulations could change the way we do business.
How far away are we from financial reporting standards unification and why is this standardization important?
If a consensus can be met it will be better in the long run from a general business standpoint. It is much more efficient for a business to have one scheme versus various schemes. The long-term savings of standardization will be much greater than any shorter term financial pain suffered in a possible conversion to global standards. It is, therefore, important to think about a process that will internationalize accounting systems. A one-system standardization is a long-term trend, something that certainly won’t happen in the next three to five years, but it is something prudent to think about now. For example, currently we see different reporting standards in Asia, India, South Africa, Brazil, Canada, and the U.S. We have to be aware of cultural differences in the auditing and financial reporting between these regions. While many international auditing and reporting standards are not yet formalized, making a decision on auditing and financial standards today that doesn’t factor in potential changes tomorrow could prove costly.
Were you able to bring any aspects of your recent international experience back to your Loyola classes—and if so, how does this new knowledge related to the larger business community?
I’ve been able to ask several people working in British and German CPA firms and businesses to make presentations to my class using GoToMeeting. It is beneficial for students to hear different perspectives, especially considering the potential domestic switch to IFRS. Texts in the U.S. are generally written on American audit standards and principles. The international approach exposes students to the different cultural approaches of the European audit community and the European business community. They learn the differences, biases, and focuses so they can be aware of all sides of the issue—U.S. and global. Conversely, we often hear the phrase, “That’s how they do it in the U.S.” from our European counterparts. Well, not exactly. It’s not always done here the way they think. There are learning opportunities for both sides.
In the long run, this approach helps students throughout their careers. In the past, correspondence was more measured and formal. Today that correspondence is instantaneous. A slower, more formalized atmosphere allowed one to think about what was being said. Now, there is less time to think and there is an urge to send immediately. Being more knowledgeable and aware of cultural differences helps you think before you act, which is especially important when dealing with sensitive issues.
Rick Klink, Ph.D., professor of marketing, just returned from an international immersion tour that led undergraduate marketing students through several European countries.
Tell us about your most recent trip.
Loyola has been conducting international field study trips for more than 20 years. The objective is to immerse students in broader cultures through experiential site learning. We recently traveled to Germany, Austria, France, and Italy with a 300-level undergrad marketing class for interactive meetings with international companies in those countries. Students were asked to realize the larger world that they live in through observation of cultural and consumer differences and then build the links as to why these differences exist. We visited multinational companies including BMW and Johnson & Johnson and smaller local organizations, like the Italian fine leather maker SKIN and the Innsbruck Tourism Board, where the students enjoyed the opportunities of meeting and networking with international marketers. It was fascinating to see how different businesses break down customers into various segments and develop products based on what those segments are interested in. Unique marketing approaches are developed for different cultural segments—a great look at the blend of cultures and how business models are developed.
The class made use of new technologies during the trip. How did those tools and applications benefit the learning process?
In preparation for the trip the class was broken into seven teams and each team had to prepare a presentation on one of the companies that we were to visit. Prior to our departure Adobe heard about our trip and offered to help by providing the class with the most recent versions of Collage and Photoshop for the students to test, which were downloaded on Loyola iPads. The students were then able to use software provided by Adobe to document their experiences at these companies. Then, as we continued our tour, the students made use of the Abode software to complete individual assignments and also compile personal presentation material to share with prospective employers.
What were the main takeaways for the class?
The main message is that learning by doing has a more profound and lasting impact than simply reading. Immersion experiences are deeper and richer. If you are working globally, try to get out and immerse yourself in cultural differences. If you rely on simple reading, you might lose some of what you learned after a few years. With immersion experiences, however, you get to see the passion in person and the lessons learned are internalized. For instance, you can read about Johnson & Johnson’s global impact, but their practices become concrete examples to refer to if you can see them in practice.
Mike Unger, Ph.D., associate professor of management and international business, recently returned from teaching a course in Africa on economic development and a class field study trip to South America.
While in Africa, you taught a class that focuses on economic growth and competition. What factors must be present for economic growth in new markets?
I teach a class at Loyola and also at the Strathmore School of Business in Kenya called “Microeconomics of Competitiveness: Firms, Clusters, and Economic Development,” a course developed by Michael E. Porter, Ph.D., a strategy and competitiveness guru at Harvard University. The course considers the factors that make nations competitive and prosperous from a bottom-up, microeconomics perspective.
Porter concludes that there are four factors that must be present for a nation to be economically successful. The first is the presence of favorable factors for production: human resources, natural resources, education, capital, and infrastructure. Second, there must be demand conditions, where a nation possesses natural resources that are in demand due to external conditions, such as oil and the use of internal combustion engines. Third, there must be competing firms with outward-looking strategies that support competition and a lack of monopolies. Finally, businesses cannot exist in a vacuum. An economically successful nation must have supporting industries and clusters, which are businesses and groups that depend on one another for sustainability. The wine industry in California is a good example of a cluster. The grape growers, wine makers, barrel manufacturers, restaurants, banks, and educational institutions are all separate entities, but collectively depend on and support each other.
How did your time in South America reinforce the ethical considerations relevant to emerging markets?
I recently traveled with a group of Loyola Executive MBA students to the emerging markets of Santiago, Chile, and Sao Paolo, Brazil, as they witnessed economic development first-hand. Chile was forced out of a Marxist tradition with the coup and military dictatorship of Augusto Pinochet. During Pinochet’s reign the country underwent a transformation that brought about economic reform. Today, partly as a result of that transition, Chile is one of the world’s largest exporters of copper and agricultural products. The major ethical question that must be raised and always considered when looking at a situation such as Chile is whether the ends of economic development justify the brutal means that produced those ends. Brazil, in contrast, also has a history of military dictatorship, but has transformed itself along industrial lines. The Sao Paolo metro area that we visited has grown to be larger than the entire island of Cuba. The sprawl has been enabled by huge industrial growth, particularly in the automobile manufacturing industry. What we see in Brazil is that while the country is growing at a phenomenal rate, it still struggles with lingering poverty. Many of the country’s people are being left behind. What must be considered in a case such as Brazil’s is how we can broaden to the focus on economic growth to become more inclusive.
How can emerging markets keep these considerations in mind and create a positive economic environment for growth and balance?
In addition to teaching in Kenya, I also recently spent time at the National University in Rwanda, where I worked to set up meetings between senior government officials and businesspeople for talks that focused on increasing production and creating an environment to support clusters and firms. Businesses are the primary creators of economic value in any given country. Governments don’t have the capacity to create economic value, but play the vital role in establishing an environment to support businesses. You need productive businesses to have a successful country. Thus, it is important for both businesses and governments to maintain an open dialogue and understand the roles of both groups.