Download ISACA-June2007-Global Enterprise

The Global Enterprise
Thomas F. Siems, Ph.D.
Sr. Economist and Policy Advisor
Federal Reserve Bank of Dallas
and
Sr. Lecturer, School of Engineering
Southern Methodist University
ISACA North Texas Meeting
Dallas, Texas
June 14, 2007
Important Questions
(Learning Objectives)
• What drives economic growth?
• How does globalization impact
global enterprises?
• What’s IT’s role?
• What’s needed to succeed in
the global economy?
What is Globalization?
What is Globalization?
The increased integration of the
world’s economies through
increased flows of goods, capital,
labor and ideas.
World Trade on the Rise
(Exports + Imports)/Gross World Product
60%
55%
50%
45%
40%
35%
30%
25%
Source: IMF
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
19
78
19
76
19
74
19
72
19
70
20%
Capital On the Move
Percent of Gross World Product
30
Private Capital
25
20
15
10
Foreign Direct Investment
5
Source: World Bank
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
19
78
19
76
19
74
19
72
19
70
0
More Workers Crossing Borders
Foreign Born as percent of US Population
14
Source: World Bank
12
10
8
6
4
2
0
1960
1970
1980
1990
2000
GDP per Capita
Constant 2000 US$
Source: World Bank
40000
35000
United States
30000
25000
20000
EMU
15000
10000
World
5000
Middle East
East Asia/Pacific
Sub-Saharan Africa
19
60
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
0
Latin America
Index 1960=100
350
GDP per Capita
300
High Income Countries
250
Middle Income Countries
200
Low Income Countries
150
Source: World Bank
19
60
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
100
Quick Case Study:
The United States of America
(last decade)
• Increased Economic
Stability/Resiliency
• Strong Productivity Growth
• Low Inflation Environment
U.S. Business Cycle
Expansions and Contractions
Real U.S. GDP Growth Less Volatile
Real Gross Domestic Product, (SAAR, Bil. Chn. 2000 $)
20%
15%
10%
5%
0%
-5%
-10%
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
Real GDP Growth is More Stable
Mass Production Era
(1948 - 1973)
Lean Manufacturing Era
(1974 - 1995)
Information Engineering Era
(1996 - 2005)
8%
15%
17%
43%
46%
53%
46%
30%
42%
Average = 4.08
> 3.5% Real GDP Growth
Average = 2.92
0% - 3.5% Real GDP Growth
Average = 3.47
Negative Real GDP Growth
Productivity Growth Rising
Nonfarm Business Sector: Output Per Hour of All Persons (SAAR, % Chg)
4
3
2
1
0
'70
'75
'80
'85
'90
'95
'00
'05
Productivity Growth Getting Stronger
Mass Production Era
(1948 - 1973)
Lean Manufacturing Era
(1974 - 1995)
Information Engineering Era
(1996 - 2005)
11%
24%
26%
38%
49%
30%
59%
27%
36%
Average = 2.74
> 2.5% Productivity Growth
Average = 1.52
0% - 2.5% Productivity Growth
Average = 3.11
Negative Productivity Growth
Inflation Rates Lower
CPI Inflation: 12-month % change
20
15
10
5
Core Services
0
'68
'70
'72
'74
'76
'78
'80
'82
'84
'86
'88
'90
'92
'94
'96
'98
'00
'02
'04
Core Commodities
-5
What’s Driving Growth?
• Practices?
• Policies?
• Pennies?
• Providence?
• Proficiencies?
Good Practices???
• new technologies
• better management
• focus on better, faster, cheaper
Importance of technology
Solow (1970) and Colecchia & Schryer (2002)
Who Supplied My Cheese?
Supply Chain Management in the Global Economy
Thomas F. Siems
Federal Reserve Bank of Dallas
2005 NABE Annual Meeting
“Change and Competitiveness: Who Moved My Paradigm?”
Chicago, Illinois
September 26, 2005
Who Supplied My Cheese?
Supply Chain Management in the Global Economy
You Are
Here!
Thomas F. Siems
Federal Reserve Bank of Dallas
2005 NABE Annual Meeting
“Change and Competitiveness: Who Moved My Paradigm?”
Chicago, Illinois
September 26, 2005
Reduced Bullwhip Effect for Durables
10 year moving standard deviation of one-quarter annualized growth
20%
Production growth volatility
15%
10%
Sales growth volatility
5%
0%
'69
'71
'73
'75
'77
'79
'81
'83
'85
'87
'89
'91
'93
'95
'97
'99
'01
'03
'05
Inventory Management Improves
Manufactured Durable Goods: Inventory/Shipments Ratio
2.75
2.50
2.25
2.00
1.75
1.50
1.25
'60
'65
'70
'75
'80
'85
'90
'95
'00
'05
Logistics Costs
Percent of Goods Component of GDP
40
35
Total Logistics Costs
30
25
20
Transportation Costs
15
10
Inventory Carrying Costs
5
'81
'82
'83
'84
'85
'86
'87
'88
'89
'90
'91
'92
'93
'94
'95
'96
'97
'98
'99
'00
'01
'02
'03
'04
Air, Sea, and Telecommunications Costs
1990 US $
250
Telecommunications
200
150
100
Sea Freight
50
Air Freight
0
1930
1940
1950
1960
1970
1980
1990
2000
Good Policies???
• good institutional structures
that protect people/property
• better monetary policies
• freer trade
• less regulation/rigidity
Importance of policies
Roll & Talbot (2001)
Importance of markets
Adam Smith (1776)
Importance of free trade
David Ricardo (1817)
Strengthening Globalization’s
Invisible Hand: What Matters
Most?
Adam S. Ratner
West Monroe Partners
Thomas F. Siems
NABE’s
48th
Federal Reserve Bank of Dallas
Annual Meeting
September 10-12, 2006
Boston, MA
Our Model
People
Ideas
Things
Economy
Investment
Climate
Rule of Law &
Protection of
Ideas, People
and Things
Economic
Growth
Average Tariff Rates Declining
Percent, unweighted
35
30
25
20
Developing Countries
15
10
5
Industrial Countries
0
'80
'82
'84
'86
'88
'90
'92
'94
'96
'98
Total World Trade & Regional Trade Agreements
(Exports plus Imports)/Gross World Product
Number of Regional Trade Agreements
50
80
70
45
60
40
50
35
40
30
30
20
25
10
20
0
'65
'70
'75
'80
'85
'90
'95
'00
'03
Rigidity of Employment Index
Index, 0 = Low Rigidity
90
80
70
60
50
40
30
20
10
0
United States
United
Kingdom
Japan
Industrialized Nations
Mexico
China
India
Developing Nations
Mozambique Congo, Dem.
Haiti
Least Developed Nations
Time to Start a Business (days)
Days
250
200
150
100
50
0
United States
United
Kingdom
Japan
Industrialized Nations
Mexico
China
India
Developing Nations
Mozambique Congo, Dem.
Haiti
Least Developed Nations
Time to Register Property (days)
Days
250
200
150
100
50
0
United States
United
Kingdom
Japan
Industrialized Nations
Mexico
China
India
Developing Nations
Mozambique Congo, Dem.
Haiti
Least Developed Nations
Time to Enforce Contracts (days)
Days
1000
900
800
700
600
500
400
300
200
100
0
United States
United
Kingdom
Japan
Industrialized Nations
Mexico
China
India
Developing Nations
Mozambique Congo, Dem.
Haiti
Least Developed Nations
Legal Rights Index
Index, 10 = Highest
10
9
8
7
6
5
4
3
2
1
0
United States
United
Kingdom
Japan
Industrialized Nations
Mexico
China
India
Developing Nations
Mozambique Congo, Dem.
Haiti
Least Developed Nations
Good Pennies???
• importance of well-developed
financial markets
• freedom and opportunity
• reward entrepreneurial spirit
Importance of investment
Rousseau & Sylla (2001)
The Importance of Investment
Sw itzerland
Norw ay
USA
Denmark
Sw eden
Finland
United
Austria
Canada
Ireland
Netherlands
Japan
Belgium
Australia
Iceland
Germany
France
Singapore
New Zealand
Spain
Italy
Portugal
Taiw an
Hong Kong
Greece
Slovenia
Korea
Czech Republic
Hungary
Israel
Estonia
Chile
Poland
Slovak Republic
Malaysia
Mexico
China Mainland
South Africa
Croatia
Thailand
India
Russia
Bulgaria
Romania
Brazil
Turkey
Philippines
Colombia
Jordan
Indonesia
Venezuela
Argentina
0
20
40
60
Creditworthiness Rate (0-100)
80
100
Creditworthiness Index and GDP/capita (PPP)
45000
40000
NOR
GDP/capita (PPP)
35000
30000
25000
20000
15000
10000
5000
0
30
40
50
60
70
Creditworthiness Index (0-100)
80
90
100
Creditworthiness Index and GDP/capita (PPP)
45000
USA
40000
IRL
GDP/capita (PPP)
35000
NOR
NOR
UK CHE
30000
25000
20000
PRT
15000
10000
5000
0
30
40
50
60
70
Creditworthiness Index (0-100)
80
90
100
Creditworthiness Index and GDP/capita (PPP)
45000
USA
40000
IRL
GDP/capita (PPP)
35000
NOR
NOR
UK CHE
30000
25000
CZE
20000
PRT
15000
RUS
10000
5000
0
30
40
50
60
70
Creditworthiness Index (0-100)
80
90
100
Creditworthiness Index and GDP/capita (PPP)
45000
USA
40000
IRL
GDP/capita (PPP)
35000
NOR
NOR
HKG
UK CHE
30000
JPN
ISR
25000
CZE
20000
PRT
15000
RUS
10000
CHN
5000
IDN
IND
0
30
40
50
60
70
Creditworthiness Index (0-100)
80
90
100
Creditworthiness Index and GDP/capita (PPP)
45000
USA
40000
IRL
GDP/capita (PPP)
35000
NOR
NOR
HKG
UK CHE
30000
JPN
ISR
25000
CZE
20000
PRT
15000
ARG
RUS
BRA
CHL
10000
VEN
5000
CHN
IDN
IND
0
30
40
50
60
70
Creditworthiness Index (0-100)
80
90
100
Creditworthiness Index and GDP/capita (PPP)
45000
USA
40000
IRL
GDP/capita (PPP)
35000
NOR
NOR
HKG
UK CHE
30000
JPN
ISR
25000
CZE
20000
PRT
15000
ARG
RUS
BRA
CHL
10000
VEN
5000
CHN
IDN
IND
0
30
40
50
60
70
Creditworthiness Index (0-100)
80
90
100
Good Providence???
• not likely: 9/11 attacks, 2001
recession, wars, natural
disasters, corporate
malfeasance, stock market
bubble, IT investment bust, rising
energy costs, etc.
• BUT...highlights the importance
of knowledge/skills
Good Proficiencies???
• importance of an educated
and skilled workforce
• technologies that increase
productivity and output
• ideas matter
Importance of ideas
Paul Romer (1990)
Importance of education
Black & Lynch (2001)
Average Years of Schooling
Years
14
12
10
8
6
4
2
0
United States
United
Kingdom
Japan
Industrialized Nations
Mexico
China
India
Developing Nations
Mozambique Congo, Dem.
Haiti
Least Developed Nations
The Importance of Ideas: Education
Iceland
Ireland
Austria
USA
Norw ay
Finland
Chile
Sw itzerland
Hong Kong
Denmark
Israel
Singapore
India
Japan
Netherlands
Sw eden
Czech Republic
Germany
Australia
Spain
United
Belgium
Greece
Brazil
Canada
Thailand
Turkey
Malaysia
France
Taiw an
Hungary
Colombia
Bulgaria
Korea
Jordan
Portugal
Argentina
Indonesia
Estonia
Italy
Mexico
Slovak Republic
Slovenia
Poland
Croatia
New Zealand
Romania
China Mainland
Philippines
Russia
Venezuela
South Africa
0
1
2
3
4
5
6
Skilled Workforce Rating
7
8
9
Skilled Workforce Rating and GDP/capita (PPP)
45000
USA
40000
NOR
IRL
35000
ISL
GDP/capita (PPP)
UK
30000
JPN
ITA
25000
NZL
SLA
20000
15000
ZAF
RUS
CHL
10000
VEN
CHN
COL
BRA
5000
IDN
IND
0
2
3
4
5
6
Skilled Workforce Rating (0-10)
7
8
9
Ideas Matter!
To Strengthen Globalization’s
Invisible Hand:
• Enforce legal protections under the
rule of law
• Create an investment climate that
rewards the entrepreneurial spirit
• Continually develop an educated
and skilled workforce
• Promote new technologies that
increase productivity and output