China-Latin America: a two-way affair

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IE Focus | By María del Pilar Galeote, Professor at IE Law School

China’s growing presence in Latin America is a reality, but is only half the story. Now it´s time for Latin America to do the same in China.It is a proven fact that China´s presence in Latin America is on the increase. Analyses have been made of the advantages and opportunities brought about by the situation, but disadvantages and threats it may hold for Latin American economies in the long run have also been revealed: Latin America has the opportunity to become a large-scale supplier of raw materials and, in particular, an area that demands processed products from China. That is why the route between China and Latin America needs to become a two-way affair. Like many Western countries, Latin America needs to increase its presence there.

There are many strategic reasons for encouraging entrepreneurs to invest in China. First of all, there is a significant competitive advantage in terms of costs. Low labour costs, as shown by the hourly pay of a worker in the manufacturing industry, even if current studies show that labour costs will increase in China over the coming years. If that were the only attraction of the Chinese market, decisions about investing in the country would not always be taken because the same competitive advantage also exists in other countries. However, there are other strategic reasons that justify the decision, such as the Chinese market’s huge potential at the present time. It is a market with a growing middle class that is increasing the level of demand in a large number of sectors.

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Innovation and Hope

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IE Focus | By Salvador Aragon, Professor at IE Business School

Wanting to create a better future is what makes for the best ideas. And we need good ideas more than ever now, as leveraging new opportunities becomes increasingly important.The current economic situation has brought about a drastic change in how people perceive innovation. Only two or three years ago, our society looked on innovation as an important economic and business phenomenon, albeit one that was on the fringe. Innovation was the responsibility of enigmatic R&D departments or, at most, creative individuals who were accepted to a lesser or greater extent in traditional organisations.

Today, innovation is the process in which we place much of our hope. Hope in innovation can be seen in messages like “innovation is of key importance for economic growth” or “a business that does not innovate disappears”. However, this focus may be wrong and may be holding back the development of innovative skills.

From old Europe, the perception of Chile in recent months has been dominated by the rescue of the Atacama miners. The emotions we witnessed at camp “esperanza (hope)” showed a society that was ready to fight for a goal and that remained fully convinced of its own possibilities.

Hope alone, based on a profound belief in one´s own possibilities and in the fact that the future is full of opportunities that are there for the taking, makes innovation possible. Only by facing the future with confidence, despite an adverse present, will human beings, enterprises and societies be capable of generating new ideas, new businesses and new projects that allow them to move forward. Imagine how different the result of the rescue would have been if hope had been lost during the 17 days before the first contact was made with the miners. 

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Profitable growth and intrapreneurship

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IE Focus | By Pablo Martin de Holan, Professor at IE Business School

Most firms either don´t see business opportunities, or see them and don´t act on them because they lack resources or don’t give their people the right incentives. Growing a business is a good way of achieving its strategic objectives and maintaining its competitive advantage. Growth can, however, be expensive and very uncertain. The dilemma facing the manager is straightforward: find new opportunities that are not too risky, and therefore not so interesting, or move away from the familiar area of competition with the investment and risk such a move involves. 

There is also a third alternative: growing on the back of opportunities created by intrapreneurship. This form of growth allows businesses to leverage opportunities that are usually missed. These opportunities can be many in number and range from minor innovations to radical market changes. Their common denominator is that they can appear anywhere in the business; one common situation in a company is that those who know how can´t, and those who can don´t know how. This short article will offer the basic ideas behind this method.

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IE wishes a happy new 2011!

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