Be prepared to deal with globalization, SMU's Niemi warns - China and India are among challenges for MBAs, companies, says business school dean

If Albert Niemi had to write his dissertation today, he would explore the global challenges facing the U.S. economy, which he calls "very real and very intense."

Lucky for the dean of the Southern Methodist University Cox School of Business, he finished his dissertation 37 years ago.

The topic was an eerily similar subject matter. Back then, the University of Connecticut student focused on the economically challenged Northeast, as the South was becoming an open economic force.

Today, he says, it's largely two developing economic behemoths -- China and India -- that present a challenge to the entire U.S. economy.

This recognition shapes how Dr. Niemi runs the Cox School. In the very same spirit in which Dr. Niemi moved his family south many years ago, he recognizes that globalization is something you can either fight against and lose, or join and win.

In a recent interview with The Dallas Morning News, Dr. Niemi discussed how the South, and Texas in particular, is still rising and how globalization can make or break the MBAs of tomorrow.

Let's talk local first. How is Texas faring on the national economic map?

Texas recently passed New York for the greatest number of Fortune 500 companies. We now have 56 based here, compared to 55 in New York and 52 in California. And this trend should continue.

Why are so many companies deciding to move to Texas?

The biggest source of growth in Texas over the last two years has been corporate relocations from California. Vendo, the largest distributor of vending machines, Kinko's and others have made Texas their new headquarters. You just can't be competitive in a globalized world with a 12 percent state income tax.

Is that the only factor at work in Texas' favor?

No. For a lot of companies, a third of their cost structure is fuel, so getting a product from California to Maine can be incredibly expensive. That's really pushed a lot of companies to relocate to the center of the country.

What we're seeing today among the states is the biggest separation of the winners and losers in 35 years. In the next decade, 40 of the 50 states will shrink or remain stagnant, leaving only 10 states with positive demographics.

Even within Texas there are "haves" and "have-nots" -- of the 254 counties, 100 are shrinking.

Which brings us closer to home. How does Dallas fit into this mass movement?

Right now Dallas is in the sweet spot. In fact, if you look at a map of NAFTA, if you include Canada and Mexico, our two biggest trading partners, North Texas is right in the middle of it all. The D-FW area has just passed Philadelphia as the fourth-largest metropolitan area in the country, after New York, Los Angeles and Chicago. We really are in a golden situation.

Since you mentioned NAFTA, let's talk bigger picture. Back in the 1970s, it was an exodus of companies out of the Northeast. Today we're grappling with an exodus of companies out of the country.

Clearly global competition is nothing new. Think of the early 1980s and the miracle of Japanese manufacturing. Thirty years ago, one in three Americans were working in manufacturing; last year that had dropped to 14 percent, and we're headed to 10 percent. The point is the U.S. has been losing manufacturing capacity for a long time.

So what's changed in the last 30 years?

Today Japan and the United States are losing their manufacturing bases to China, South Korea and other parts of Southeast Asia. But again, this is something that's been going on for some time.

What few seem to be talking about is India, which is looking to dominate the United States in the financial services and technology arenas. In the last four to five years, we've seen India threatening jobs that would otherwise be going to our MBAs.

You're right that we hear about China day in and day out. But India?

India has the best engineering schools in the world. If an Indian student can't get into an Indian institute of technology, they go to MIT or CalTech. But it doesn't end there. In 10 to 15 years, the main competitors for U.S. business schools will be in India.

So how does an MBA program adapt?

We don't just talk globalization. Because global competition is so intense, we've required all our MBAs to go abroad since 1998. This year, for example, we have 120 executive MBAs who will be spending a week in Havana. There is so much European investment going on there right now. It will be interesting for our students to see what's left of communism.

And we've also put it into our five-year plan to require all of our BBA undergraduates to go abroad as well. If a student doesn't have a keen awareness of what's going on outside the U.S., they're not going to be successful in their careers. It's as simple as that.

Are there any particular areas of growth here in the United States that fit in well with the globalized world you describe?

If I had to make my best guess, I'd say it would be in health care and biotechnology. Did you know that in the last 400 years there have been 32 major outbreaks where millions of people have died worldwide? The population is not just aging here; health care will also become a global issue.

We've certainly seen health care grow here as a local industry. It backs up your characterization of North Texas being in a "sweet spot." But what about tomorrow?

Dallas is a very entrepreneurial place, and there's a ton of venture capital here. That's part of what made running a business school in a place like Dallas that was going to rival New York vastly appealing.

But that's the Dallas of today. The risk is that we become complacent.

How do we avoid such a fate?

That's kind of like asking Wayne Gretzky why he scored so much. His answer was that when he was on the ice he tried to skate to where the puck was going to be, not where it was. Dallas and the rest of the country have to also be looking down the road when we'll be battling significant challenges from both China and India.

We need to be nimble and be where the puck is going to be in 10 to 15 years.