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The debate format in <i>International Business Strategy in Non-Market Environments</i> “helps the students push their creativity to come up with a complex equilibrium that’s win-win-win — on strategy, economics, and ethics,” Assistant Professor Susan E. Perkins says.

Susan E. Perkins

Creating ‘win-win-win’ solutions

<i>International Business Strategy in Non-Market Environments</i> pushes students to think beyond their assumptions

By Chris Serb ’09

8/21/2009 - Susan E. Perkins’ classroom has no “Ben Stein” moments: no long, pregnant pauses when students zone out in the face of repeated questioning.

Instead, the typical class engages in a lively debate — recently, for example, on whether an Indian pharmaceutical company that copies U.S.-patented AIDS drugs is a humanitarian or a pirate.

“If people can’t afford a necessary treatment, they’ll say ‘I’ll just die,’” says one student — a native of India — who has lined up on the humanitarian side of the debate. “Anyone who can provide drugs at lower cost is keeping people with AIDS alive.”

“But it’s not appropriate for them to make profit margins that rival Big Pharma’s when they’re stealing the technology,” another student, lined up squarely on the “pirate” side, protests.

This type of debate is one of the tools that Perkins, an assistant professor of management and organizations, employs to encourage discussion in her class, International Business Strategy in Non-Market Environments.

“In class I often try to find the most polarizing views on these issues, and it’s a great opportunity because many students have already anchored on their views before they even come into class,” Perkins says. “The debate format helps the students push their creativity to come up with a complex equilibrium that’s win-win-win — on strategy, economics, and ethics.”

The course, taught by both Perkins and Associate Professor of Management and Strategy Benjamin Jones, has quickly become one of the Kellogg School’s most popular classes. The curriculum examines specific non-market problems that managers in developing countries are likely to face, such as information access, contract enforcement, and political corruption.

The course also looks at the roles of major international institutions — including the World Trade Organization, the International Monetary Fund, and various non-government organizations — in shaping international policy. Specific cases examine the Argentine financial crisis of 2001, Nike’s problems with international labor practices, and issues around navigating Mexico’s grupo structure.

“Issues facing multinational corporations that do business in foreign markets could certainly be relevant to my work,” says Allana Jackson ’09, who took Perkins’ course in the spring of 2009 and now works for Bain & Company, a global business consulting firm. “One issue we’ve discussed which I find particularly compelling is the role of firms as agents of development, even as they take advantage of opportunities for larger markets or lower wages in developing markets.”

Many of these lessons could apply in established international markets such as the European Union countries. But Perkins’ class spends most of its time and intellectual energy focusing on developing markets such as India, China, Brazil, and Indonesia.

“The biggest opportunities are in emerging markets, but penetrating those markets to get to the customer is incredibly challenging,” Perkins says. “A major focus of this course is enabling Kellogg students, as future managers, to navigate these very difficult non-market conditions and tap into a huge market potential.”

During the classroom debate on AIDS drugs in India, Perkins prods her class with questions that explore whether U.S. drug companies would be justified in trying to profit off of developing countries, or whether they have a moral obligation to solve global problems.

“Is it good to make a profit on the lifesaving stuff?” Perkins asks. As several students on the “pirate” side of the debate argue that profits are not justified when lives are at stake, Perkins brings the class back to the reality of the market environment. “They have the R&D, they have the skill — but they also have shareholders! Why would a corporation try to solve a global pandemic if that solution is going to drive them out of business?”

Eventually, the class turns to a discussion of public-private partnerships, and the notion that multinational corporations can still do well by doing good.

“If the students can see the outer boundaries of these arguments in the debates, then it will help them cultivate a more inclusive and creative strategy in the middle ground,” Perkins says. “There’s a lot of middle ground, and the students come to see that a combination of both perspectives will help the multinational corporation serve the public good and still do really well.”

Fifteen years ago, such issues probably would not have been talked about much at Kellogg, Perkins says. “But we’re at a critical juncture with globalization, and the likelihood that Kellogg graduates will spend some time abroad or working on an international project during their career span has significantly increased,” she says. “That’s why understanding these issues is so important, now more than ever.”

Perkins notes that large multinational corporations have a tremendous ability to influence international partners, for good or for ill. “The multinational institution can have more influence than an entire economy: in 2008, Wal-Mart’s revenues were larger than the GDP of Poland, and Bill Gates’ net worth is larger than of the combined GDPs of several developing countries in sub-Saharan Africa, such as Kenya, Ghana and Côte d'Ivoire” Perkins says.

The key for large multinational corporations that want to expand, Perkins notes, is getting the non-market side right and anticipating problems before they happen.

“For example, you may want to market your products in China, but China has been known to have weak enforcement of intellectual property protection,” Perkins says. “It is imperative to address those variations that are associated with weak institutions; even the strongest economic powers can fall prey and head straight toward market failure.”

The ultimate goal of Perkins’ course is to create a new breed of international manager with savvy in negotiating those complicated issues.

“The biggest challenge our Kellogg alums are likely to face is an environment where institutions are very different from what they would see in the United States,” Perkins says. “If we think of globalization in a bigger context, we can end up on the ‘right side’ of development: by helping these economies grow in ways that are good not only for the shareholders, but also for the countries where they’re doing business.”