FEATURE — Fall 2007
   

 
James T. Little is the Donald Danforth, Jr. Distinguished Professor of Business with an expertise in international economics and international business.

Finding Market Openings

Olin Business School Professor Jim Little suggests how corporations can seize global opportunities in a world that, he believes, is anything other than flat.

By Rick Skwiot

When the Canadian-born economist James T. Little joined the Washington University faculty in 1971, the Berlin Wall stood tall, Mao Zedong controlled China, and Washington University was a Midwest school virtually unknown beyond American shores.

Now, just some three-and-a-half decades later, the Cold War is a distant memory, China is a capitalist powerhouse, and Washington University ranks as one of the world’s leading research institutions, with campuses and partners around the globe—the last due in part to the efforts of the globetrotting Donald Danforth, Jr. Distinguished Professor of Business Jim Little.

Shanghai, home of Fudan University, is widely regarded as the center of China’s modern economy. The Pudong New Area has emerged as the financial and commercial hub.

Little—who moved from the economics department to the Olin Business School in 1982—helped develop the School’s London Internship Program and ran it for 15 years. In 2002 he became the first academic director of the new Executive MBA Program at Fudan University in Shanghai—a post he still holds, along with teaching there and in St. Louis and directing Olin’s European Programs. He also serves as an Ambassador to Fudan for the McDonnell International Scholars Academy.

His global interests drive his research as well, which focuses in part on international business and corporate global strategies. In particular, his research focuses on how successful companies navigate the differing political and economic environments and base their strategies on the anticipation of change rather than just reacting to it.

A world without boundaries
“I don’t believe that the world is flat,” says Little, alluding to the title of Thomas L. Friedman’s best-selling book on globalization. “But boundaries have gone away. Globalization is breaking down geographic and cultural barriers and increasing opportunities.”

The Bandra Kurla Complex is the first of a series of commercial “growth centers” in a suburb of Mumbai (formerly Bombay), India.

Those opportunities arise, says Little, not because the world is flat and similar, but because of asymmetries and unique local characteristics, which create “spaces” where companies can operate successfully on a global scale.

Good examples of successful global companies abound—such as those in India’s mushrooming information technology (IT) sector. India did not have a big capital market, but it did have specialized brainpower. Savvy entrepreneurs there, says Little, saw a way to make that work for them globally: “‘We have a high level of IT skills, and we speak English. We can write code. Therefore, we can do things for Western companies at 25 percent of their costs with very little capital investment.’”

Little says, “If the world were flat, if Indian computer engineers got paid the same as engineers here, this couldn’t happen.”

Similarly, Washington University’s highly successful foray into China with its Shanghai Executive MBA Program (see sidebar) hinges on asymmetries—specifically, the world-class conceptual knowledge of Olin faculty and their skill in teaching combined with the detailed understanding of the Chinese context of their partner faculty from Fudan, which they have now wedded to five years of experience in working with Chinese executives.

“Olin faculty now have a lot of experience with the issues that managers in China face and are able to show the students there how to apply internationally accepted theories and concepts to these problems,” says Little. “At the same time, they are truly at the forefront of their fields as researchers and bring the very best science to China. That is what we think China needs as it moves to the economic center stage.”

An Exceptional
Executive Education
The Olin School of Business Shanghai-based Executive MBA Program—ranked tops in China by the Financial Times of London and eighth worldwide—is already paying dividends to Chinese managers studying there and to business development in China. However, its greatest benefits for Washington University will come in the long term, as a part of its overall globalization efforts, says Little, its academic director.

“Universities reflect where they are,” says Little. “If we want to be a university that does its job for the world, we have to be there. So many of the benefits are not short term but long term, in what we learn.”

He sees the Shanghai EMBA Program as a piece in the University’s expanding global puzzle—along with the McDonnell International Scholars Academy, the new International Center for Advanced Renewable Energy and Sustainability, global research collaborations, and research and educational ties with multinational corporations.

“We’re forming serious joint ventures worldwide,” says Little, “which is something entirely different. The linking together of universities internationally is going to be really, really potent. Our Shanghai EMBA Program is just part of that bigger picture.”

While substantively involved in the University’s globalization effort, Little gives primary credit for Washington University’s global rise to Chancellor Mark Wrighton.

“Mark is way out ahead of most others in globalization,” says Little.

However, as far as the Business School is concerned, Little ranks as the leader in its global growth, according to its dean, Mahendra R. Gupta, the Geraldine J. and Robert L. Virgil Professor of Accounting and Management.

“Jim is the guru of international issues at Olin, whether they are economic, strategic, or organizational,” says Gupta. “He has been the architect of many international programs at Olin including the famed London internship program, London summer program, and more recently the Executive MBA Program in Shanghai, in partnership with Fudan University.

“Jim tirelessly travels around the globe as our ambassador, building strategic relations and creating unique opportunities for our students and programs. We are grateful for his contributions to Olin and Washington University.”

Future global winners
In the future, Little sees companies in Brazil and China finding similar spaces, market openings where they can “leapfrog” competition—particularly in the field of energy.

Brazil, despite having no great oil reserves, already produces half of its automotive fuel—from sugar cane. They’ve developed efficient processes to extract ethanol from the sweet grass, producing a fuel significantly cheaper than that U.S. companies can extract from corn, says Little. Thanks in part to high U.S. quotas on sugar imports—a policy that leads to the price of sugar in the United States being more than double the world price—Brazil’s great agricultural engine is generating an innovative and powerful global industry.

Similarly, China’s dearth of petroleum and its pollution problems are fueling a whole new market segment: solar energy.

“Chinese companies will become leaders in energy by advancing solar technology,” says Little. “There is lots of Chinese R&D developing cheaper ways of doing it.”

The research and development are driven by China’s enormous energy needs—each year adding electrical generation power equal to India’s entire output—and by its rank as the world’s number one polluter, pollution that is literally choking the country. With the economy growing at 11 percent annually—much in energy-intensive industries—it still is only one-eighth as large as the U.S. economy, says Little.

“Their energy use will be massive if they catch up to us economically,” Little says, “but they won’t be able to breathe. They have to develop alternative energy sources.”

And while necessity may be giving birth to this inventiveness, it comes in a world that is still global, not flat.

“Here’s an exceptionally compelling market space that’s not crowded, where there’s real opportunity,” says Little. “It’s not surprising that solar cell manufacturing is dominated by Chinese companies. Because of the worldwide demand for energy, they will become global companies quickly.”

How to succeed in global business
Despite the expanding global economic clout of Brazil, India, and China, the multinational corporate world is still ruled by American and European companies, says Little, in part by establishing vibrant subsidiaries in those emerging economies. However, he believes American corporations are particularly adaptive to operating in a global environment, thanks to their “lucky” multicultural history.

“The United States is big and diverse. U.S. customer-tastes and buying-habits differ from, say, West Texas to New York, so American companies are accustomed to dealing with different cultures and different languages,” says Little. “They can deal with international diversity as well, thanks to internal corporate cultures that had to learn to diversify in a very large home market.”

He cites the offshore success of American companies like McDonald’s and Wal-Mart, models for how to succeed in global business.

“The United States is big and diverse.
U.S. customer-tastes and buying-habits differ from, say, West Texas to New York, so American companies are accustomed to dealing with different cultures …,” says Little.

“Top companies will find new markets, larger markets, new places to do manufacturing, new business models in new cultural and legal contexts,” says Little. “The companies that will benefit are the ones that can recognize opportunities and build on them. Now that they possess all kinds of skills and abilities internally, they need to understand the market, distribution, and customer needs.”

Frightening change, extraordinary gains
But new ways of doing business globally—new and larger supply chains and a focus on processes that produce consistency, convenience, and customer satisfaction—necessarily mean abandoning old ways. And while that can upset some people, it portends significant advances for many.

“Globalization—such as the advance of Wal-Mart—can be frightening,” says Little, citing efforts in some locales to fight the intrusion of Wal-Mart stores into communities. “It produces a change in the way people live—and a world where you are less connected to where you are,” he says, and also to the local culture.

“But the underlying economics tells us the bigger the market, the better the market. When we look back on this era 50 years from now, we’ll see how really extraordinary it is,” says Little. “With India and China—and even in the United States—globalization has resulted in the extraordinary improvement of the economic lot of so many people. There are many more gainers than losers.”

Rick Skwiot is a free-lance writer based in St. Louis.