The bruised U.S. economy limped through the first quarter, growing at just a 0.6% pace as housing and credit problems forced people and businesses alike to hunker down. The statistic did not meet what economists consider the classic definition of a recession, which is a retraction of the economy. This means that although the economy is stuck in a rut, it is still managing to grow, even if modestly.

Consumers—whose spending is vital to the country’s economic health—turned much more cautious, also restraining overall economic growth in the first quarter. Their spending rose at just a 1% pace. To bolster the economy, the Federal Reserve is expected to lower a key interest rate by one-quarter percentage point to 2%.

The souring job market and rising costs of the usual teenage indulgences (a slice of pizza, a drive to the mall, the hottest new jeans) are causing teens to do something they rarely do: be thrifty. Jobs for teens have been less plentiful, and parents who supply the allowances are feeling the economic pinch themselves.

Secondhand clothing chains have seen business surge this year as teens and their parents buy popular brands like Gap, Banana Republic and Juicy Couture at a fraction of the regular price.

Teen hiring has slumped by 5% since March 2007, with many mom-and-pop stores, which typically hire younger workers, laying off employees. Hiring in the overall job market fell by just 0.1% during the same period. That’s still not as bad as the 13% drop in teen hiring in the early 1990s. Last month, teen retailers suffered an 8% drop in sales at established stores. The good news is that the under-20 crew is still spending on tech gadgets like iPods, cellphones and headsets.

Job scarcity? There’s plenty of farm jobs and food factory jobs available. Teens are just not willing to work for minimum wage or even higher. Actually illegal immigrants are being hired over teenagers. Teens can’t work past a certain time and can’t work as many hours as an adult, so employers do not want to hire them. Here’s how to survive these new times: swap meet, garage sales, 99 cent store, good will, salvation army and Walmart.

The high cost of doing business in India is pushing some smaller technology companies to relocate elsewhere in Asia. Soaring wages and rentals there are having a significant impact on mid-sized companies, many of which blossomed for several years amid a vast pool of well-educated workers and comparatively lower operating costs.

The $52 billion software industry — arguably India’s best known overseas — is now confronted with multiple challenges.
The economic slowdown in the U.S., the single largest market for outsourced orders, has cast a shadow over near-term business prospects.

It’s being exacerbated by local issues such as an appreciating currency, rising fixed and operating costs, a growing shortage of skilled manpower and the prospect of a sharp tax increase. Under so-called sections 10A and 10B of Indian tax laws, software companies are currently granted a tax holiday on income generated out of units at designated software-technology parks — a concession that brings down the effective tax rates to 12% to 15%, compared with the peak effective corporate tax of 33%. That benefit is due to expire in March of next year.

Larger firms will be able to expand in special economic zones spread over 30 acres or more and take advantage of similar tax holidays at those facilities. But small- and mid-sized companies, who don’t have a need for and can’t afford such large facilities, will feel the pinch immediately because of the “uneven playing field.”

On the jobs market, the supply of Indian software professionals is also growing tighter because of the rapid expansion. In the financial year ended March 2005, Indian software and business-process outsourcing companies employed fewer than 1.05 million people directly. At the end of March 2008, the number likely grew to 2 million.

With millions of graduates being churned out every year, “the size of the talent pool isn’t the issue. Our issue is that the employability of that group of people coming out of those colleges.”

Wages, meanwhile, have been shooting up at the rate of about 15% a year in tandem with the demand for experienced software developers. A study of 30 emerging countries conducted by Gartner last year, which showed India was the “most lucrative destination as far as outsourcing was concerned” on a scale of ten parameters, including labor pool, English-speaking skills, cost structure, infrastructure and government policies. However, if wages continue to rise at a rate of 15% and the rupee-dollar exchange appreciates by 5% a year for a few more years, it’ll dent India’s competitive advantage

Chinese intertwine business and personal affairs much more deeply. They do things for their partners even if they are personal affairs.

If you wander into any of China’s five floored bookstores, the first thing you notice right when you enter the store won’t be the newest hardcovered fictions. It’ll be management books written by successful American businessmen. On shelf after shelf, you could see copies of Jim Collins’s “Good to Great,” Jack Welch’s “Straight From the Gut,” Tom Peters’s “Re-Imagine!” and just about everything the late Peter Drucker ever wrote. One section you won’t find in Chinese bookstores is a section for management or human resources.

There’s a good reason for this. In the West (not to mention Japan and South Korea) management skills are a given. Graduate schools of management churn out M.B.A.’s, while instilling the basic processes and systems that virtually all multinational companies rely on. People who rise to the top of companies are the ones who have mastered the art of management. But there are also many first-rate managers who populate the middle ranks of companies. They are the lifeblood of most big companies.

That’s not the case in China. The shortage of managerial talent is huge. There just aren’t very many people here who have the range of skills you need in that position. Xiang Bing, dean of the Cheung Kong Graduate School of Business, said: “We Chinese are so willing to work hard for money. We are intelligent. We have the drive and the passion. But we put too much attention on technology and not enough on institution-building. And our soft skills are a real weakness.”

One issue with management is that most Chinese entrepreneurs hire friends and family because they don’t trust people they don’t know. And if they don’t get help fast, they are going to lose control of their rapidlygrowing businesses. Rapid growth, though, is only one of the issues these entrepreneurs are facing. Every bit as difficult are ingrained mind-sets and attitudes that can make it difficult for Chinese executives to adapt professional management techniques.

Many Chinese entrepreneurs (even those who have graduated from the executive M.B.A. program) don’t want to hire M.B.A.’s because they bridle at having to pay professional management salaries. Another problem is that many Chinese executives believe that because it is a Chinese business, professional managers won’t fit in the system.

When dealing with each other, the Chinese, quite simply, do business differently than Western companies do business. For one thing, there is a lot of petty corruption that is an ingrained part of business, especially among the state-run companies. Purchasing managers favor one vendor over another because they get a kickback. A sales rep buys customer loyalty with under-the-table payments. And so on. People also tend to put their own interests over the interests of their company — not a huge surprise, given that everyone worked for the state just a generation ago.

Finally, there is the gnarliest issue of all: the importance placed on the deep, intertwining set of relationships known as guanxi. Unlike the West, you don’t just have a business relationship in China; you have a relationship that interchangeably mixes the personal with the professional.

One billion dollars is no longer enough to gain entry to Russia’s rich list.

Ten billionaires failed to make Forbes magazine’s annual list of the 100 richest Russians that is led by those who built their fortunes on the country’s metals resources. Russia’s richest 100 people had a combined fortune of $522 billion - 3.8 times more than the total when Forbes first published a Russian list in 2004.

Another reason for the increase in dollar billionaires was the fall in the value of the U.S. currency. Boo!

China Surpasses USA in Exports and Now Riding Germany’s Tail

China has overtaken the US as the world’s second-biggest exporter, the World Trade Organisation (WTO) said yesterday. WTO economists are also sceptical about how long emerging developing countries that have spearheaded global growth “can maintain a strong pace in the face of sluggish demand in major developed markets and rising inflationary pressures.”

1. Germany   2. China   3. USA

Germany!? How often do you see ‘Made in Germany’ on labels. Apart from some cars and Adidas, what else does it export?

Another stellar performance by China, which recorded a 26% rise in its merchandise exports to $1.2 trillion, enabled it to surge ahead of the US to be ranked the world’s second biggest exporter and is breathing down the neck of top-placed Germany.

Major Chinese banks are racing to open branches across the United States, but they are unlikely to make much money from them any time soon. The banks, once in deep financial trouble but now much stronger after a series of Chinese government bailouts, are increasingly interested in opening overseas shops, especially in major U.S. cities like New York. The idea is mainly to raise their image as international banks that are publicly traded rather than as state-owned agencies controlled by Beijing.

So far, only two Chinese banks — Bank of China and Bank of Communications – have branches in the United States. At least a half dozen Chinese banks, including Industrial and Commercial Bank of China and smaller rival Merchants Bank, plan to seek approval from the Fed to launch U.S. branches this year. Almost every time U.S. Treasury Secretary Henry Paulson traveled to Beijing to lobby officials for U.S. banks to have wider access to Chinese financial service sectors, Paulson would receive similar requests from his Chinese contacts.

 Wherever you turn, the rise of Asia is making its impact felt on our existence.

To many Victorians, British supremacy was a simple matter of racial supremacy - Europeans, and the English in particular, were fated to be the masters. The truth is that they are masters of the world no more.  The global power shift from the West to the East is no longer just a matter of debate confined to learned journals and newspaper columns - it is a reality that is beginning to have a huge impact on our daily lives.

Napoleon III compared China to a sleeping giant and warned: “When China awakes, she will shake the world.” After a long hibernation, China, and her 1.3 billion people (twice the population of the U.S. and EU combined) is awaking almost overnight. And not just China. The world’s second most populous country, India, is industrialising at a historically unprecedented pace.

Like anything, there are downsides that are becoming more apparent. Unskilled workers in the West have become unsettled by the threat to their jobs as production moves East. The most vulnerable Western workers have found their wages stagnate as they struggle to compete in an increasingly global market place. And competition for raw materials is pitting East against West.

Europeans have, for half a millennium, been unchallenged as the global colonisers, but last month the respected Economist magazine dubbed the Chinese “The New Colonists“.  The dire warnings from the International Monetary Fund this week that the West now faces the largest financial shock since the Great Depression, while the Asian economies are still powering ahead, simply underlines our vulnerability in this new world order.

There is an infectious confidence in Bollywood, and the price of Chinese antiques is rocketing as the newly rich Chinese decide they want a slice of their history.

Asian countries are not just buying up foreign raw materials, but as their companies try to become global leaders, they are buying up Western companies. From Kazakhstan to Indonesia to Latin America, Chinese firms are gobbling up oil, gas, coal and metals. Canadian authorities were recently alarmed to find the Chinese interested in exploring the Arctic Ocean, in a bid to get a share of the minerals beneath the thawing icecap.

 And Western governments are concerned that the rules of the game are changing. Most worryingly, as China’s brutal suppression of the once independent Tibet shows, this is not a superpower that respects Western standards on human rights. Western attitudes of superiority to China and the rest of the East will also subside, as Westerners realise they are no longer the masters of the world.

Study Shows Average Age of Management Positions Now 25 Years Old

Generation Y people born after 1981 tend to climb to managerial posts in companies at a relatively much younger age than their older counterparts. Employees born after 1980 tend to first become managers at an average age of 25.3, compared to 31.8 for their counterparts who were born in the 50s. The Y-generation people seem to climb the career ladder faster as they tend to have stronger ability to learn and a stronger work ethic, according to the poll.

Most of the business executives said they do not particularly consider employees’ ages when they are choosing new leaders within their corporations. They choose according to negotiation and coordination ability. The ability to solve problems and professional abilities are more important factors when they are considering promotions.

Interestingly enough, the Y-generation people do not necessarily perform well in management terms. According to company executives, managers aged 39-48 were the best performers.

Europe, Here They Come 

European MBA programs may have traditionally lacked the brand recognition of their U.S. counterparts, but that’s changing fast. The continent’s increasingly dynamic business environment, improvements to curricula, and growing corporate demand for employees with international experience are attracting top-notch candidates from all over the world. In addition, most Europe management programs are cheaper, shorter, smaller, and more diverse than their U.S. rivals, which is drawing a growing number of American students to studies in the Old World.

Applications from the U.S. to INSEAD, an elite French business school with campuses in Fontainebleau and Singapore, grew 20% in the past year and the school’s 2008 enrollment of Americans grew nearly 24% since 2007, to 73 students.

Young people are recognizing the value of an MBA but don’t want to spend two years earning one—the length of most U.S. programs. Others credit the U.S. recession. The average tuition at the top 10 European schools is less than $73,000, vs. $86,600 at Harvard Business School, and about $95,000 at Wharton. Furthermore, MBA students are increasingly looking to pursue social justice through business, and many European schools have responded with a wealth of new courses on corporate social responsibility, social entrepreneurship, and doing business in developing countries.

A potential threat to the growth of European MBA programs is 46 European countries have pledged to adopt an Anglo-American system of higher education by 2010 and to recognize each other’s degrees more than in the past. Rather than spending as many as six years at one school to earn one degree, students will complete a bachelor’s degree in three to four years and have the option to do a master’s elsewhere.

To build on their growing reputations, many European institutions are now opening satellite campuses in other parts of the world, particularly the Middle East and Asia. While the repercussions for Europe’s MBA programs remain to be seen, the current outlook is bright: Applications are up, admissions are increasingly selective, and ever more companies are demanding multilingual recruits with global polish.

The New Economics of Outsourcing

Companies that traditionally rely on India for offshore IT services have been looking for that something beyond India for years, citing such reasons as high employee turnover and unreliable communications. But the search has taken on added urgency recently, especially for U.S. companies, as a weakening dollar has boosted the cost of IT services priced in India’s rupee. Over the past five years the dollar has declined about 16% against the rupee. High real estate costs and expectations for tax increases also have diminished India’s allure.

As outsourcing to India becomes more expensive, North American companies are more inclined to “nearsource,” keeping work in the Western Hemisphere, where they can operate in a closer time zone. In years past a company could save 40% to 50% by hiring Indian firms to handle IT and other services. Should the U.S. dollar continue its descent, that differential would shrink to 10% to 20%.

How much longer the world’s companies will have financial incentive to outsource to India is a matter of lively debate. India’s “advantage as an offshore location is fast eroding—its attractiveness takes a hit with each passing day,” analysts at Forrester Research wrote in a January, 2008, report. Forrester catalogued some of the well-known challenges, such as increasing staffing costs, turnover and strained infrastructure.

The benefit of doing business, from a labor-cost point of view, in such locales as Bangalore, India, will disappear for some companies in three to four years. Indeed, while costs are increasing in India, the country is generally less expensive than Latin America and most other locations, especially for companies that don’t require high-end software developers. The average annual salary for an IT worker in the U.S. is about $75,000. In India it’s about $7,779 and in Argentina, it’s slightly higher at $9,478. In Brazil, the annual wage jumps to $13,163, and in Mexico it climbs to $17,899.

Increasingly, companies want a provider that can nimbly shift tasks and labor among its own global network of work centers. The dollar’s decline aside, even Brazilian firms are benefiting as companies spread their outsourcing around. The real question, if you’re going to sign onto somebody for five to seven years, is do they have a vision for how they’re going to move work around the network.

 The Labor Department on Friday said nonfarm employment fell by 80,000 jobs in March, more than expected and the biggest drop in five years. Financial markets saw this as reinforcing the need for further Federal Reserve interest rate cuts.

Adding to the bleak picture, the Labor Department said a total of 152,000 jobs were lost in January and February, sharply above the prior estimate of 85,000, and the jobless rate jumped to 5.1% from 4.8%, the highest since September 2005. Construction employment fell 51,000, the ninth consecutive month of job losses.

Factory employment fell by 48,000, the biggest decline since July 2003, exacerbated by a 24,000 fall in auto manufacturing jobs that the department said likely reflected the impact of a strike at an auto parts maker. Most economists, having seen a third monthly decline, were now convinced that the economy is in recession.

The numbers drew calls from Democratic presidential hopefuls Hillary Clinton and Barack Obama for aid to families facing foreclosure on their homes, while Republican candidate Senator John McCain said tax cuts and streamlining burdensome regulations were needed to foster growth.

A New York Times/CBS News poll released on Friday showed the economy’s deepening woes were weighing heavily on the minds of Americans. Of those polled, 81% said they believed things were “pretty seriously” on the wrong track, up from 69% a year ago and 35% in early 2002.

This billboard and press campaign is now running in Mexico, is a colorful map depicting what the Americas might look like in an “Absolut” — i.e., perfect — world. The U.S.-Mexico border lies where it was before the Mexican-American war of 1848 when California, as we now know it, was Mexican territory and known as Alta California.

The campaign taps into the national pride of Mexicans, according to Favio Ucedo, creative director of leading Latino advertising agency Grupo Gallegos in the U.S. Ucedo, who is from Argentina, said: “Mexicans talk about how the Americans stole their land, so this is their way of reclaiming it. It’s very relevant and the Mexicans will love the idea.”

The U.S. is the largest importer of Absolut in the world, so I’m perplexed that it concluded there could be a net gain by this ad campaign. Absolut really blew it by uncorking this one. Perhaps it has consumed too much of its own product. They’ll have plenty of surplus stock to drown in though. But don’t worry, folks. This is in no way a threat to our national sovereignty.

 4 Companies That Conquered America

Accounting for almost 30% of world GDP, the United States is the world’s largest and most demanding market for almost everything from oil to microprocessors to premium coffee. Companies around the world aspire to do business in the U.S., or at least with U.S. companies in their home markets. By doing so, they learn much about the latest management practices, they can be closer to the cutting edge of innovation, and they can boost their reputations by supplying well-known U.S. firms.

So how do you penetrate the U.S. market? The annals of business are littered with foreign companies that have never quite succeeded in the USA. But here are four companies that have. Each carries a special lesson.

1. Royal Bank of Scotland. This company built up a strong retail market share in the U.S., not under the RBS brand, but through a series of acquisitions of regional (not national) banks. RBS is adding value for its shareholders by letting these banks retain their individual brand identities, by focusing on improving back office efficiencies, and by having the highly respected CEO of one of the acquired entities lead the combined U.S. organization.

2. IKEA. IKEA offers a furniture retailing value proposition and experience unparalleled in the U.S. market. There are no national furniture retail chains, making market penetration easier. IKEA’s location selection expertise and their established global supply chains enable them to offer exceptional category-killer prices that are further keys to success.

3. ING. The Dutch bank converted its weakness (no retail branches in the U.S.) into a strength. Following a successful Canadian market test, ING gave its entrepreneurial general manager the green light to offer retail banking services to U.S. consumers but exclusively on an online basis. Taking advantage of its low no-bricks-and-mortar cost structure, ING was able to offer generous rates on certificates of deposit.

4. Dyson. The British home appliance maker earned a break when it managed to get a Best Buy buyer to take one of its vacuum cleaners home to test. The buyer was impressed. Fortunately for Dyson, Best Buy became the first U.S. retailer to stock Dyson vacuum cleaners. Electronics retailing in the U.S. is concentrated (10 chains control 60% of the market) and tough to penetrate. But Dyson could not have succeeded had its products not been superior to other vacuum cleaners already in U.S. stores.

Gone are the days when U.S. companies hired locally

The head of the top U.S. phone company AT&T Inc said on Wednesday it was having trouble finding enough skilled workers to fill all the 5,000 customer service jobs it promised to return to the United States from India. “We’re having trouble finding the numbers that we need with the skills that are required to do these jobs,” says AT&T Chief Executive Randall Stephenson.

So far, only around 1,400 jobs have been returned to the United States of 5,000. Stephenson said he is especially distressed that in some U.S. communities and among certain groups, the high school dropout rate is as high as 50%.

“If I had a business that half the product we turned out was defective or you couldn’t put into the marketplace, I would shut that business down,” he said. Stephenson said neither he nor most Americans liked the situation, and the solution was a stronger U.S. focus on education and keeping jobs.

The Department of Education (DOE) announced Thursday that the Commonwealth’s dropout rate is at an all-time high. The annual dropout rate rose from 3.3% in 2006-2007 to 3.8% this year. Among all students,

9.1% of Hispanic students, 6.4% of African American students, 2.7% of white students and 2.6% of Asian students drop out each year. While Hispanics have the highest population of dropouts within their demographic, white students actually had the most dropouts last year, 51.2% of the total number.