Industry in a global world

The world might seem to be getting smaller every day, but the concept of globalisation does not bear up to scrutiny at least in terms of markets and companies, according to ESRC-funded research.

Alan Rugman, Professor of International Business at the Kelley School of Business, Indiana University and Senior Fellow, Templeton College, University of Oxford, has looked in detail at the commercial transactions of 500 multinational enterprises. The annual Fortune 500 features the 500 biggest multinational enterprises measured by sales. These corporations dominate international business, accounting for over 90% of the world’s stock of foreign direct investment and nearly 50%of the world trade. 430 of them are based in the core ‘triad’ regions of the United States, the EU and Japan.

Alan Rugman

Alan Rugman

The Fortune 500 dominate the business world and appear to have a genuinely global presence. Rugman, however, is not convinced of the degree to which these companies truly are international. Globalisation, he reports, has been defined in business schools as the production and distribution of products and services of a homogenous type and quality on a worldwide basis. In other words selling the same products from London, Ontario to East London, South Africa and from Lima, Ohio to Lima, Peru.

He has constructed the Templeton Global Performance Index, created in 2000 by Rugman and Oxford colleagues Michael Gestrin and Rory Knight for each of the past three years. In it, he ranks the leading multinationals according to the profitability of their foreign operations in the previous year. The pharmaceutical industry, for example, has topped the global performance rankings by industry every year in Rugman’s index measure for international sales. Over the three years, however, he says, the gap between the best and worst performing companies has widened dramatically. Indeed, Rugman suggests that rather than seeing a trend towards increased globalisation we are now seeing deglobalisation as companies perform poorly at the global level, struggle to stay profitable and begin to focus parochially on their domestic markets.

Statistics from the World Investment Report 2001

Statistics from the World Investment Report 2001

According to Rugman’s analysis, very few of the Fortune 500 have any significant presence in all three parts of the triad. In fact, only a handful of companies, such as Nestlé and Unilever, food suppliers with a strong research base can really be said to qualify as ‘global’ multinational enterprises. A much larger subset of the 500 are bi-regional multinationals but this does not point to a strong globalisation of world trade.

Indeed, the lack of evidence for what some have deemed the inevitable process of globalisation in international business is particularly stark in the retail sector, which makes up nearly 10% of the world’s largest 500 multinationals and which includes the biggest corporation by sales, Wal Mart. Of the 49 retailers regarded as ‘global’ in the Fortune 500 list, eighteen operate only in their native land. 24 are highly concentrated domestically, just five are bi-regional, and only one is global, luxury goods retailer Christian Dior/LVMH.

The car industry too is very much a non-global enterprise. More than 85% of all cars manufactured in North America are built in North American factories, over 90% of cars made in the EU are sold in the EU and that figure is 93% for Japan.

Rugman argues that these and other statistics speak for themselves and provide an entirely different perspective of globalisation. The received wisdom that we are living in a globalised world, commercially speaking, needs to be replaced. Multinational companies are not, says Rugman, operating in an integrated and homogeneous world market.

Further reading

ESRC
http://www.esrc.ac.uk/ESRCInfoCentre/index.aspx

Alan Rugman
http://www.bus.indiana.edu/rugman/

Rugman paper
http://www.bus.indiana.edu/rugman/Papers-books/Web%20Papers/The%20Myths%20of%20Globalization.doc

Nestle
http://uk.finance.yahoo.com/q?s=887208.F

Unilever
http://uk.finance.yahoo.com/q?s=ULVR.L&d=t

Further reading – The end of Globalization
http://www.amazon.co.uk/exec/obidos/ASIN/0712684956/davidbradleyse0e

Weathering volcanoes

Accurate weather forecasts could help predict volcanic eruptions, according to British environmental scientists.

Researchers at the University of East Anglia working with colleagues at the Montserrat Volcano Observatory and the University of Maryland have discovered that intense rainfall can trigger volcanic dome collapse. This leads to a particular type of eruption in which a build-up of molten rock inside the side of the volcano becomes unstable and collapses spewing out lava, toxic gases, and rock.

The Soufrière Hills volcano in Montserrat with pyroclastic flow deposits visible on the left flank

The Soufrière Hills volcano in Montserrat with pyroclastic flow deposits visible on the left flank

The eruption on the Caribbean island of Montserrat in July last year coincided with the first heavy rainfall in seven months, explains team member Adrian Matthews. Within hours of the rainfall starting the volcanic dome collapsed. Matthews, a meteorologist, leads the research team with UEA volcanologist, Jenni Barclay. The scientists also found that two previous eruptions of the Montserrat volcano, Soufriere Hills, had also been preceded by heavy rainfall.

The researchers point out that one of the most dangerous aspects of volcanic dome collapse is the accompanying surge of searing hot rocks and boulders that are carried at high speed down the mountain on a bed of volcanic gases, the pyroclastic flow. Weather forecasts, the team says, used in conjunction with rainfall records might help make more accurate predictions of imminent volcanic activity and offer people who live in the shadow of active volcanoes an early warning of eruptions.

The devastated Montserrat capital of Plymouth under volcanic debris

The devastated Montserrat capital of Plymouth under volcanic debris

Montserrat had seven months with little rain and a period of sustained volcanic dome growth. Once the intense rain set in, it was only a matter of hours before the dome collapsed and pyroclastic flows started. The weather system that brought the rain could be seen in satellite images and was forecast 60 hours before the volcanic activity. The next step is to work out how the rainfall triggers the eruption, it may be the water being turned to steam and building up inside the dome, like a pressure cooker, adds Matthews.

Further reading

Geophys. Res. Lett., 29(13) (2002)
http://dx.doi.org/10.1029/2002GL014863

Soufriere Hills
http://www.geo.mtu.edu/volcanoes/west.indies/soufriere/

Suggested searches

Soufriere Hills volcano
Pyroclastic flows
Volcanoes

A closer look at a near miss

On the night of August 18, 2002, a chunk of rock several hundred metres across flew past the Earth at a distance of 530,000 kilometres – just a little further into space than the Moon. At the time, the British media were still reeling from the possibility that another asteroid was destined to collide with Earth in the year 2019.

However, a more down to Earth appraisal by Chris Benn, Sebastian Els, Tom Gregory, Roy Ostensen and Francisco Prada using the William Herschel Telescope on La Palma, Canary Islands, of NY40 while it was at an altitude of 750,000 kilometres is helping astronomers get a better understanding of these interplanetary objects.

The WHT is the most powerful optical/infrared telescope in the world (Credit: Nik Szymanek and Ian King)

The WHT is the most powerful optical/infrared telescope in the world (Credit: Nik Szymanek and Ian King)

NY40 was travelling at 65,000 kilometres per hour during its near miss but despite this, very high-quality images were obtained in the near-infrared end of the spectrum with a resolution of 0.11 seconds of arc (about 1/33,000 of a degree). This resolution is close to the theoretical limit of the Herschel telescope and sets an upper limit to the size of the asteroid of a mere 400 metres across at the time of the observations. Several observers have reported variations in the brightness of 2002 NY40. This suggests that the rock is highly elongated and tumbling through space. Further work is required to determine its orientation during different observations and so obtain a more accurate estimate of size and shape.

Sizing up asteroids will help astronomers understand their nature and formation history as well as the potential threat they pose. There is a small population of Near Earth Asteroids (NEOs) whose journeys around the sun occasionally approach or intersect the orbit of our planet. A direct intersection in time and space is thought to have occurred 65 million years ago wiping out the dinosaurs.

H-band (1.63 microns) image of asteroid 2002 NY40 taken on the night of August 17 to 18, 2002. (Credit: The ING NAOMI team)

H-band (1.63 microns) image of asteroid 2002 NY40 taken on the night of August 17 to 18, 2002. (Credit: The ING NAOMI team)

Fortunately, despite the media scare stories, the odds are stacked against an asteroid hitting the Earth in the near future. Close encounters with large Near Earth Asteroids, like 2002 NY40, do happen every fifty years or so. NEA 2001 CU11 passed just outside the Moon’s orbit on the 31st of August 1925 but it was not observed at the time. Indeed, it was not actually discovered until 77 years later.

The NAOMI Adaptive Optics system at the Nasmyth focus of the William Herschel Telescope (Credit: The NAOMI team)

The NAOMI Adaptive Optics system at the Nasmyth focus of the William Herschel Telescope (Credit: The NAOMI team)

NAOMI was created by researchers at the University of Durham and the UK Astronomy Technology Centre. It incorporates a system of fast-moving mirror elements, which correct in real-time for the defocusing of stars caused by the Earth’s turbulent atmosphere – it compensates for twinkling, in other words!

Further reading

Near Earth objects
http://neo.jpl.nasa.gov/news/

Deep impact!
http://www.space.com/scienceastronomy/planetearth/deep_impact_991228.html

NAOMI
http://www.roe.ac.uk/atc/projects/naomi/

UK Astronomy Technology Centre
http://www.roe.ac.uk/ukatc/

Suggested searches

Near Earth object
Asteroids