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Kellogg students and Professor Bala Balachandran visited Samsung Electronics in Seoul, South Korea, as part of the GIM China-Korea trip on March 22.

Looking East for a world of business insight

Intensive experiential GIM course lets Kellogg students broaden their global perspectives, learning firsthand the challenges of doing business in Asia

By Adrienne Murrill

6/28/2007 - Ed. note: This spring, more than 500 Kellogg School students participated in the Global Initiatives in Management course, a popular academic offering that combines 10 weeks of classroom training with two weeks of field research in one of several countries. GIM, which began at Kellogg in 1989, allows students to meet with business and government leaders while pursuing research.

For centuries, Asia has captivated the Western imagination as an exotic place rich in culture, tradition and trade. In 1271, Venetian merchant Marco Polo was among the first Westerners to travel to what now is China; today’s business leaders are equally compelled by Asia’s economic prospects.

“If the corporate world ignores China and India, we are ignoring one-third of the world’s population,” says Bala Balachandran, the J.L. Kellogg Distinguished Professor of Accounting Information and Management. A faculty adviser on the Kellogg School Global Initiatives in Management (GIM) excursion that took a group of students to China and South Korea in March, Balachandran helped the participants gain an intimate and valuable perspective on management challenges and opportunities there.

This year, Kellogg students and faculty advisers organized 10 separate trips. “GIM China-Korea” is similar to the other two-week research excursions, offering intense, behind-the-scenes learning through interaction with top politicians and business leaders and immersing students in the country’s culture. Students toured Beijing, Shanghai and Seoul, enjoying attractions such as Tianamen Square, the Forbidden City, the Oriental Pearl Tower, and Gyeongbokgung Palace, as well as acrobat shows and a Huangpu River cruise.

Other highlights from the China trip featured leadership insights from U.S. Ambassador Clark T. Randt Jr. “Doing business in China is an exciting prospect,” Randt told Kellogg students visiting him in Beijing. China presents many different aspects, he said, including the country’s double-digit growth: Each year, the country needs 7 percent growth just to absorb the new workers entering the market, and 8 percent to maintain its development.

Randt also discussed how the Chinese and U.S. economies are “joined at the hip.” Seventy percent of China’s economy is export-driven, and the U.S. buys more than a third of those goods. China can present special challenges for those seeking entrance from outside the country, he said. For instance, Americans tend to focus on the deal points in business, but the Chinese, while aware of those points, focus on the overall business relationship.

Doing business in China actually keeps Andrew Grant awake at night. The McKinsey & Co. managing director shared his perspective with Kellogg students during an energetic presentation in Shanghai about the challenges shaping China’s commerce. Growth again emerged as a topic.

“It took 20 years for China’s economy to become the size of Italy’s,” Grant said, but now the Asian behemoth grows by the size of an Italy every year.

While this pattern is exciting for business, Grant said, entering China’s market comes with risk — including those associated with the country’s banking system and the political instability associated with Taiwan. Still, China’s economic importance is undeniable, and Grant advised business leaders to observe the country’s dynamics up close if they wish to create “tailored-to-China” solutions to the hurdles their businesses will encounter in this massive market.

“Expect to be positively surprised on volume and negatively surprised on margin,” Grant said, adding that innovation is key to win in China, a market he said operates at a pace unlike any other.

As the GIM trip moved to Seoul, students visited Samsung Group’s headquarters for an inside look at what makes this international conglomerate run.

After touring Samsung’s new product showroom, the Kellogg team attended a presentation by S.I. Lee, senior vice president of marketing for Samsung Electronic’s digital media business. He outlined the company’s history, including the radical restructuring after the Asian financial crisis a decade ago. At that time, he quipped, the belief was to “change everything except your spouse and kids.”

Lee said that Samsung embraces change and revises its products and strategy to remain innovative. Most important in that strategy are Samsung’s employees, including some 30,000 R&D researchers, he said.

Later, students attended a presentation about one of Samsung’s recent successes —Bordeaux, a flat-panel TV, learning about its development, design and the strategy behind the product.

Said Pablo Merheb ’08: “One eye-opening aspect of the trip was realizing that my vision of what ‘emerging’ China would look like was completely wrong. Beijing, Shanghai and their surrounding cities are not only developed but sophisticated. The sheer pace of modernization and change is staggering.”