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We are all citizens of the world tied together by the common culture of commerce. With approximately 35% of our Owen community comprised of students who come here from another country to study business, we see and experience this phenomenon daily. Understanding other cultures, opinions, and capabilities is no longer optional in the business world. That’s why you’ll find a global perspective increasingly integrated into our curriculum. And that’s why you’ll see even more students taking international trips, such as the one that Professor Ray Friedman leads to China during spring break. Despite having lived in Asia and Europe while growing up and traveling the globe in my business career, I eagerly packed my bags and camera equipment to join Professor Friedman and our students for the visit to Shanghai and surrounding areas. What I was expecting and what I discovered were very different. I expected Shanghai to be a modern Chinese city with strong remnants of its ancient culture. I found the new, but I had great difficulty finding the old. Capitalism is alive and well in Shanghai.
I was impressed by the dramatic investment in infrastructure that
has taken place in western Shanghai since the late 1980s—high-rise
residential buildings, roads, and factories. It seemed that Shanghai
was discarding its past as it embraced its future. It is a city of
millions—friendly people on bikes, in buses or cars, hurrying
about their daily lives. I will take away many fond memories of this
trip, one of which is just how well-equipped our students were to
handle the demands of the culture and their consulting projects.
Jim Bradford P.S. Please join me for my next Owen Alumni Webcast
on Monday, May 15, at 1:00 PM Central. We’ll talk about our
current job placement statistics, the incoming class of 2008, and
an update from the May 5 Alumni Board meeting. If you’d like
to join the webcast, please email marshall.turnbull@vanderbilt.edu.
There’s only one problem with the lavish-salary-with-car-and-driver scenario. It is rapidly disappearing as the Chinese job market changes. And that means that MBAs looking to China for career opportunities will have to adjust their strategies. The “expat” salary packages are still attainable. (Expats are anyone who enters China retaining the salary and benefits they received in, say, the U.S., along with added benefits to help them manage a “hardship” assignment. Chinese can have “expat” packages in China too, if they are hired in the U.S. and transferred to China.) But the domestic supply of MBAs has risen steadily over the past 5-10 years to meet the seemingly insatiable demand. As a result, fewer American-owned companies — even those, like GE, that want U.S.-trained MBAs exclusively — are willing to pay the “hardship” rates that can double the cost to employers of an executive’s salary and benefits package. Instead of $80,000 per year or more, most new MBAs must enter the market at the local rate, which is closer to $30,000. Plus, they do not get the $5,000 a month housing allowance, the free trips home to the U.S., or the car and driver. So why would a self-respecting, U.S.-trained MBA want to work in China? In a word, opportunity. Those with experience and demonstrated skill can still command the big salaries after a few years. And the upside potential is even greater. All across China, universities are turning out homegrown MBAs at an amazing rate. In addition, we’ve seen rapid growth in Executive MBA programs, both through Chinese universities and, in a few cases, through American ones (Washington University and USC, for example) that offer U.S. degree programs in several Chinese cities. Unfortunately, what we hear from executives is that the quality of MBA training has been mixed — which in turn has made hiring a Chinese-trained MBA something of a hit-and-miss proposition. This dynamic contributes in two ways to a high level of churn in China’s MBA marketplace. First, companies wind up replacing many Chinese-trained MBAs whose education leaves them inadequately prepared. (Chinese MBA programs tend to emphasize the theoretical over the practical.) Some do extremely well, but a large number also don’t do so well. Second, those who do succeed – especially those who can be effective in multinational companies – are in extremely high demand with just a few years of experience. Many jump from job offer to job offer, increasing their salaries and responsibilities with each move. As a result, employers are working hard to retain the best of the homegrown MBAs. But this flux still works for employers because of the prevailing salary structure. Even if 50% of their Chinese-trained MBA hires leave or don’t work out, it’s less expensive for the company than bringing in MBAs with an “expat” salary package. Another dynamic that affects the market for MBAs in China: While we have seen an increase in the number of Chinese who come to the U.S. for their degrees, more of them also are returning home after completing their education. In part, that’s a result of tighter immigration controls in the U.S. But it also reflects a growing mindset that “things are happening in China” — and an MBA who is away from such a dynamic marketplace for too long may miss the opportunity to become a real player. For those who make it big, the potential reward appears to be almost limitless, even though the starting salaries in China may be low. How should a U.S.-trained MBA with an eye toward China approach this booming market? Right now, faced with a fairly rigid, two-tiered salary structure, there are three general routes to consider.
The China Projects - During Weeklong Trip, MBA Students Work for FedEx, The Home Depot and Others
The assignments were as much an eye-opener as the sights and sounds of the country that most of the soon-to-be MBAs were visiting for the first time. "The projects enable the students to gain some insights that they might not be able to get in other ways," says Professor Ray Friedman, who accompanied students on the trip. "They also add another layer of the real-world experience that we believe so strongly should be part of the learning environment."
In China, the student teams worked on behalf of companies ranging from multinationals with household names to entrepreneurial startups.
One group, for example, served as the "China team" for FedEx, conducting local market research into how Chinese customers use and perceive FedEx and its competitors. "We focused on interviewing small and medium-sized businesses," says Priya Saha, one of the team members. "Through a questionnaire we developed in conjunction with the company, we asked about the key drivers, such as price and reliability, that affect how they choose a carrier. We wanted to know who within their companies makes those decisions. And we tried to get a sense of how FedEx and its competitors — which now include domestic Chinese carriers — are perceived as brands."
Priya says there were lots of interesting findings but is not at liberty
to go into detail. Like the other project teams, her group is still
compiling its report, which it will present to the client later in
the spring. Michael Monteforte and his team, meanwhile, worked on a project for The Home Depot. Specifically, they sought to learn how the company can give its Chinese suppliers (800 of whom supply 43% of the products on Home Depot’s shelves) tools to become more innovative.
Both sides were looking for ways that Chinese suppliers could evolve from manufacturers that simply follow specifications into true partners in innovation and design. "We were blown away by the amount of innovation we saw," Monteforte says. "But they don’t really have a formal process for fostering it." The group interviewed five of Home Depot’s suppliers in the Shanghai and Nanjing areas to learn how they develop products and conduct consumer research. "In our report," Monteforte says, "we will offer recommendations on the tools Home Depot can give suppliers and how to replicate that process."
Ken Binick’s team tackled one of China’s new markets that is slowly emerging from rigid state control. Their project client, Organon Pharmaceuticals, is launching an in vitro fertilization drug in China. The country’s diverse marketplace includes public health clinics as well as private clinics (joint ventures involving U.S. or Japanese companies) that have arisen in competition.
Because in vitro fertilization is almost a whole new category for Chinese consumers, "a major focus was patient education," says Binick. "We found that the public-sector clinics offered the biggest opportunity, because they are more willing to help educate patients."
Yet another team, in a demonstration of the entrepreneurial spirit that runs deep at Owen and the even deeper opportunities in China, undertook a project for a company owned by one of their classmates, Rajeev Gupta. Avankia is an IT strategy and consulting provider, with less than $1 million in revenues, that outsources software development to India. The project team’s assignment: Explore the feasibility of similar outsourcing to China as well.
"We visited two companies each day we were there," says Tyler Heath. "Some were wholly owned foreign entities. Some were joint ventures. Some were outsource providers. Perot Systems has a brand-new office in China to serve its customers that are doing business there. We looked at the cost structures and different forms of organizations in making our assessment."
In spite of their diverse assignments, all four team members said they had reached some common conclusions. "Building relationships," says Priya — and "the right relationships," added Michael — "is key." Business in China, they learned from experience, operates on personal relationships much more than in the U.S. "We had contacted Chinese classmates to help set up appointments for our team," Priya says. "It opened so many more doors for us. It’s hard to set up an appointment without a personal contact."
The annual class international business trip (last year’s destination was Brazil) included tours of operations ranging from Wal-Mart’s Pu Dong Supercenter in Shanghai to a hospital, and meetings with officials ranging from American diplomats to the dean of a Chinese university school of management. And there were elegant dinners and opportunities for sightseeing around Shanghai, where the 36 students spent most of their six days in the country.
But,
thanks to Owen’s innovative EMBA strategy project (ranked third
in the world by BusinessWeek), students also spent much of
their time working on behalf of their project clients, researching
opportunities and potential strategies for doing business in China.
As part of the global strategy project, each team was responsible for making its own contacts and scheduling appointments during the trip. Through friends of friends, Savage says, the General Spring team connected with China Sage Consultants. In the process, the team members gained insights into what is fast becoming a new paradigm for companies like General Spring.
Before they departed for China, the team had established a working relationship with China Sage via email. "They had seen the scope of our project, our agenda, and our questions," says Savage. After arriving in Shanghai, the EMBA students met with a China Sage team, which included a finance manager, operations manager, and research director.
Had all of Priya’s fellow second-year MBA students been around to hear her (not to mention the 36 Executive MBA students who also visited China in March), there might have been a chorus of "amen"s. The separate but parallel trips were designed to give Owen students hands-on experience with business in China and to deepen their understanding of what it means to live and work there. Like Priya, they all returned home with a range of perceptions that reveal the diversity and complexity of the country. Here’s a sampling of the impressions brought back by a few of the students with whom Inside Owen spoke: "I was impressed by the extraordinary optimism of the people. They see this as China’s era. You’re also struck visually by the amount of growth: the number of airports being built (the one in Beijing is in the shape of a dragon), the number of construction cranes in Shanghai. There is virtually no vacant office space in Shanghai." – Tyler Heath, MBA Class of 2006 "There is a premium on good Chinese managers who know how to motivate in a face-saving culture. Some managers are getting 50-100% raises each year. That means costs are going up, and the salary gap between managers and laborers is rising." – Melissa Savage, EMBA Class of 2006 "I was impressed by how willing businesspeople in China were to work with us. These are busy people who talked with us for two hours or more." – Ken Binick, MBA Class of 2006 "I lived there from 2000 to 2004. In just two years, the change has been phenomenal. The younger people are extremely optimistic. They are fun-loving and even less traditional than Americans. For people in their 50s and 60s, there is a little disillusionment with the younger generation. They opened to the West so much, but they still have some of their old Confucian ideals. Now they wonder, ‘Did we open up too much? Do our young people have too many Western values?’" – Michael Monteforte, MBA Class of 2006 "We saw a whole generation of only children. As only children there are certain characteristics associated with them." -- Tyler Heath, MBA Class of 2006 "I visited two hospitals: a Western one in Beijing and one that practiced traditional medicine in Shanghai. The medical system in China is not well regulated. There were no sinks in the room, no latex gloves. It made me appreciate the regulatory bodies we have in the U.S., despite the additional cost. If you’re moving your family to China, you will have to offset or absorb the costs of health care and the lack of a developed legal system. It made me think twice about whether I’d go with my kids. One plant manager we met told us that if you need a hospital, go to one of the Western ones — and have cash upfront." – Jim Jirjis, M.D., EMBA Class of 2006
"I was struck by how forward-looking people are, and by the
number of small businesses and opportunities that existed. We met
one man who left an import-export firm to start his own business.
In three years he had tripled his revenues with no end in sight.
It was amazing to me that so much entrepreneurial spirit existed
in China." – Priya Saha, MBA Class of 2006.
Caroline, who spent five years with General Mills and Pepsi Bottling Group before coming to Owen, began her blog in Beijing, where some team members traveled independently before joining the rest of the Owen team in Shanghai. After graduation in May, she’ll work for E & J Gallo Winery in California, where she will focus on marketing and strategy. "As a marketing manager for international brands, I’ll eventually be dealing with a product in China or with the Chinese consumer base," she says. "So knowing more about the country is a big plus."
Below are some excerpts from Caroline’s blog, which you can find at http://foreignconnections.blogspot.com.
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When we met the two men, we exchanged business cards in a typical Chinese fashion, with two hands and about a 15-second look-over before putting it in your pocket (sign of respect).
The second meeting was with Pacific Epoch, a blogging medium and research firm (www.pacificepoch.com). To show what a small world it is, it turns out he is friends with a friend of mine from E & J Gallo! A graduate of UNC’s MBA program, he came to manage this startup last year. Another small office with about 6 employees, we met for a couple hours discussing our second research topic, blogs. We were curious as to things such as loyalty, buzz marketing potential, and content of blogs in China.
We learned that Chinese society is like a group of concentric circles, with the family + 1 child in the center, the next ring as the 2 grandparents, the next ring as the building or block, and the last as the neighborhood, and so on. For a marketer the only part that matters is the inside of the circles because that is where the most potent referrals in way of product recommendation will occur. Because blogs help create brand awareness, but not necessarily loyalty, tapping into that center target is most critical in getting people to and loyal to your product.
We
also learned about QQ, a platform much like AOL, and the impact it’s
had over here. On a Friday night it might have a total of 14-22 million
people in China online chatting — compared to a TOTAL subscriber
base of 20 million in the U.S. for AOL. So as you can see, the possibilities
for an entity wanting to advertise or reach consumers with blogs are
limitless!
o THE WALL STREET JOURNAL: Playing games is serious business in a lot of MBA programs. Owen economics professor MIKE SHOR regularly teaches game theory in two classes. "I try to make game theory relevant to individuals in business by discarding the heavy assumptions and advanced mathematical tools," says Shor. A popular example that Shor uses in lectures is the story of how Airbus used brinksmanship with Boeing Co. when Airbus decided to build the A380 super jumbo jet.
o
THE NEW YORK TIMES: Professor MARA FACCIO
was featured extensively in an article titled “Are Rich Politicians
Selfless Politicians?” as a result of her research on politically-connected
firms. Faccio commented on the effect of wealthy politicians’
political success on the companies where the politician is perceived
as having corporate control. "The results suggest that the politician
is acting in the interest of the company," Ms. Faccio said in
an interview by telephone. "And the effects were much larger
in countries with high corruption."
o BUSINESSWEEK ONLINE: As part of the Health Care MBA program, Owen second-year student WOODROW LUCAS stayed overnight at a pediatric-care unit in a nearby hospital. Lucas says the experience forced him to see how hard doctors and nurses work, and the delicate balance between cost and treatment. Experts say there are MBAs like Lucas who view the nation's health-care challenges as opportunities to make money and help people. At Owen, for example, 25 of 180 incoming graduate business students signed up for the Health Care MBA in 2005, and the number of participants is expected to rise to between 40 and 50 in 2006.
o Professor of Economics and Strategy MARK COHEN quoted:
o MANAGED HEALTHCARE EXECUTIVE: As health care costs rise and traditional cost sharing disappears, consumers need to wear the hat of a health care financial planner. "If engaged consumers can make rational decisions rather than having them imposed, they will be more satisfied," says Professor of Health Care Management ROBERTA GOODMAN. "Budgeting tools can maximize the utility of the dollar, while also making costs more palatable when they are better understood.” o NASHVILLE BUSINESS JOURNAL: Benefiting from better-than-average weather and booming housing and retail markets, Nashville's economy and the outlook of area executives are on the upswing. Local executives were surveyed and showed resounding optimism about the local economic outlook. Professor of Entrepreneurship BRUCE LYNSKEY helped create the survey. According to Lynskey, job growth is not keeping pace with the housing market, and the overly optimistic business community may be surprised by what's ahead.
o THE TENNESSEAN: Rather than remaining solely in the domain of the wealthy, hedge funds increasingly are being used by institutional investors such as pension funds and university endowments, according to Professor of Finance NICOLAS BOLLEN. Consequently, hedge fund managers are controlling more assets than ever before.
o THE TENNESSEAN ran an article with even better news for May graduates: Salaries for holders of an MBA are heading higher. At Vanderbilt, Dean of Admissions and Career Management MELINDA ALLEN anticipates the pay range for this year's graduates to be $60,000 to $125,000 to start. Last year's average pay was $81,000, she said. So why is the MBA degree such a sought-after commodity? It promises the employer a job candidate with flexibility, Allen said. From the employer's standpoint, an MBA suggests the ability to anticipate market changes and think strategically.
o THE TENNESSEAN: MARK QUARLES’ (EMBA ’01) kitchen table doubles as a makeshift research and design center for his and his wife’s startup home-based business called HoundGear. HoundGear is a line of performance accessories for dogs and their athletic owners who are tired of running with heavy, bulky leashes.
o ROBERT HILL (MBA ’07) recently appeared on WLAC’s “The Wilson Group Real Estate Show” to discuss real estate investing, small business building, and the Nashville Capital Network.
Unfortunately, Fang was broke. With every application he enclosed a letter asking the school to please waive the application fee, which he couldn’t afford, and mentioning that he would need full financial aid in order to attend. For the next several months, he received rafts of reply letters, some accepting him but declining to fund his tuition, and many others advising him not to reapply unless he got his financial resources in order. By early April of that year, Fang began to feel panicked.
Then he remembered the letter from the Owen School. He fished it out of the dustbin and read the fine print at the bottom, which stated that qualified international students could possibly receive financial aid. Fang wasn’t certain if the business school at Vanderbilt was even a legitimate program, but he had run out of options. Because of the 12-hour time difference, he made a midnight trek to a local post office. And because China had very limited international phone lines, and the cost of such a call was exorbitantly expensive, he took a chance and phoned collect.
Knowing his days of hardship were not so long ago, he repeatedly expresses a debt of gratitude to the people of Vanderbilt and Nashville. In fact, he helped organize Chancellor Gordon Gee’s visit to Beijing. "The MBA program at Owen School changed my life," he says, "and I will never forget that. Vanderbilt’s connection with China goes back more than a century with Charlie Soong, and it will continue far into the future."
Owen
Case Competition Teams are Winners...Again
Seven top business school teams were given five hours to analyze a case about a leveraged buyout and a tax-free spin-off. Teams had to decide whether or not to do the deal, and if so, how to structure it. Each team then delivered a 20-minute presentation to a panel of three investment bankers, who served as competition judges. The competition included six other business schools: Tulane, Emory, UNC, South Carolina, Rice, and Washington University.
Congratulations to all of our teams!
Vanderbilt
MBAs Get Face Time with Warren Buffett
The day began with a trip to Nebraska Furniture Mart, a retail furniture, appliance, and electronics store Buffett purchased in 1983. The group then traveled to Berkshire Hathaway headquarters to hear the Oracle of Omaha in person. For nearly two hours, Buffett answered questions about everything from his philosophies on investing to stories about how he acquired some of his many businesses.
Students then joined Buffett for lunch at his favorite restaurant. Buffett gave two lucky Owen students, Ilka Montross and Patrick Burke, a ride to the restaurant in his Lincoln Town Car, which bears the license plate Thrifty. Casual conversation led to Buffett taking pictures with every student present, with Buffett pretending to whisper stock tips to some. After the photo session, students said goodbye to Buffett, and finished their experience with a trip to Borsheim’s Fine Jewelry, part of Berkshire Hathaway since 1989.
Personally engaging business leaders has always been an invaluable experience for business school students. Without question, meeting Warren Buffett will not soon be forgotten by the students who were able to take advantage of this once-in-a-lifetime opportunity.
Flash Movie - Preview Accelerator Program
Opportunity
to Participate in a National Consumer Study
You can participate in the survey by clicking the link: http://fisher.osu.edu/~raggio_1/ltyc.
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