Aerospace & Defense MBA International Immersion Travelogue

Follow along with the Aerospace & Defense MBA Class of 2012 as they navigate the business landscape in Brazil.  Between the 13th and 21th of July, we will post tales of our travels here. So, no matter where you are on the planet, follow us as we all learn about doing business in Brazil.

 

Friday, July 13, 2012

The Advance Team (Dr. Andy White, Dr. Bruce Behn, Dr. Randy Bradley, Margaret Ashworth) arrived in Rio De Janeiro safe and sound on Thursday, July 12. They successfully navigated the streets of Rio locating their hotel, but still looking for “The Lady from Ipanema”!

Vanesa Lopez and Alex Pastenes, our in-country hosts from Southbridge Access, met us with warm smiles, tended to our every need, and handled the last minute details prior to the students' arrival. Alex and Vanesa truly know the meaning of “customer service”.

The Advance Team holds one last meeting on Thursday night to “IRON” out the final agenda (yes, they forgot to remove the iron from the table) . 

The students arrived on Friday morning with a short time to rest and freshen up.  Dr. White gathered the group for their first briefing to start the week.  Let the experience begin!!



Back to Top

 

Sunday, July 15, 2012

Sunday morning began with a stop and a group photo on the famous, Copacabana Beach. Our guide, Vanessa, explained the important role tourism plays in the economy of the nation and Rio de Janeiro, in particular. The sidewalks between the beach and the street are paved with colored stones, with flowing ribbons to represent the waves of the ocean.

Sugar Loaf Mountain

We went to Sugar Loaf Mountain to get a view of the region from above. Visitors can only reach the site by cable cars – or by scaling the steep cliffs (for experienced mountain climbers). We chose the cable cars. The mountain is named because it is in the shape of a sugar loaf – the shape and form in which Brazil has packaged and shipped sugar around the world for hundreds of years. Sugar has played a vital role in the economic health of Brazil since the earliest years, not only providing a source of income but even serving as a form of currency in the transition from a bartering economy. The majestic views from the top of Sugar Loaf Mountain gave students and faculty a great appreciation for the scale of the city and its incredible resources, opportunities and challenges.

We humans were not alone on the mountain top.  The Brazilian people seem to respect highly the environment and other living things.  Throughout the first two days of our visit, we have seen a very clean city and wildlife and plant species of all kinds.  Even in this densely populated area, the Brazilians have made it a priority to protect green spaces and the animals that live there.

Cathedral

After we came down from Sugar Loaf Mountain, we visited a Catholic Cathedral in downtown Rio de Janeiro.  The cathedral reflects some of the most unusual architecture found anywhere in the Catholic Church.  It was constructed early in the country’s history when Portuguese settlers were trying to convert Native Americans to the Catholic religion.  To make the faith more attractive, one tactic was to construct a prominent cathedral in a pyramid-like design found in much Native American construction.  The sanctuary is as beautiful inside as out.  Visiting it near the end of a Sunday morning mass made it even more inspiring for the class.

Several members of the class took in a professional soccer game Sunday evening between two of Rio de Janeiro’s most storied teams.  A professor from a Brazilian university who studied in New York City in high school compared it to watching Southern Cal play Notre Dame in American football.  We quickly corrected him (politely) – he meant Tennessee and Alabama.    

We finished our day with a fabulous dinner at Poraco Rio’s Restaurant.  It is a traditional Brazilian steakhouse.  The food and service were tremendous.  The gracious chef even invited students into the kitchen to see a truly “lean” operation.

Back to Top

 

Monday, July 16, 2012

A New Meaning to "Living Across the Tracks" – Favela Style

Dr. Bruce Behn, Department of Accounting and Information Management 
Dr. Randy V. Bradley, Department of Marketing and Supply Chain Management

On one side, million dollar homes...across the street, a favela (i.e. loosely translated "slum" or "shantytown"). Who would have imagined? If you have ever watched the movie "City of God," which depicts the story of Rio de Janeiro’s Favelas, you likely walked away with an eerie feeling and a sense that it would be brutal and miserable to live in a place like that. Given the portrayal of drug abuse, gangs, and gang wars, it is not surprising that equate the "City of God" with "Goodfellas." However, after a recent visit to two of Rio's favelas with the Aerospace and Defense MBA class of 2012, things have changed...including the two of us.

Recognizing that Brazil is getting ready for the World Cup (in 2014) and Olympics (in 2016), it is not surprising that Rio has cracked down on drug lords and drug trafficking in the favelas with a significant military and police presence that is visible on virtually every street corner. But that still was not the thing that caught our attention or peaked our interests. 

In our combined travels to places such as Cameroon, India, Mexico, Nigeria, Peru, Thailand, and even Appalachia, we have seen how the “other” people live -- the overwhelming stench of sewage, garbage, and rotten food and the decrepit and unsanitary infrastructure. To our astonishment, that is not what we found in the Rio de Janeiro’s favelas. We did not find pollution; nor did we even get a whiff of any semblance of a rancorous smell in the streets. There were neither molehills nor mountains of garbage on the streets. As a matter of fact, we expected to find colonies of people sitting idly by begging for alms. But our greatest revelation occurred when we saw the streets filled with people buying, selling, working, playing -- in essence, enjoying life. That is the thing that grabbed our attention and peaked our interests. The favelas we saw and experienced were not slums or shantytowns; they were "communities". The people we interacted with were not begging or expecting handouts; they were busy living their lives. It didn't matter that groups of tourists were in their midst, the people of the “communities” (formerly known as the favelas) went about their business as if it were any ordinary day. 

What can we learn from the people of the Communities? We believe there are several key lessons. One thing we can learn is that a true sense of community is priceless. The people of the Communities had a true sense of community; a common union and bond that causes neighbors to help neighbors, involves trust beyond measure, and instills a sense of purpose. It was apparent to us that people were proud to live in their community. As we watched people of different races, ethnicities, and genders work side-by-side with enjoyment and kids play with one another as if they have no cares or concerns in the world, we felt, saw, and experienced something that most people in planned urban communities, and even gated communities for that matter, rarely, if ever, feel or experience -- a genuine love between the men, women, and children in that respective community.

Another thing we can learn from the people of the Communities is that working pays more dividends than handouts. The people of the Communities take great pride in providing and taking responsibility for themselves and their communities. The Communities are riddled with entrepreneurs (although some operate on the black market). We saw and shopped at a number of small businesses within the Communities. The people of the Communities have a keen ability to identify the need for a service and provide that service. There were businesses fixing automobiles, cleaning motorcycles, and providing taxi services via motorcycles. Even the vertically integrated butchery shop (with live chickens in one area and the store refrigerators right down the hall), sold to the restaurants across the street or to the men and women operating grills in front of the butchery and serving hot meats and sandwiches to those meandering throughout the Community. The people of the Communities recognize that no job is too small or beneath them. Whereas a number of them work odd jobs around the Community, many more of them work outside the Community. To put this in perspective, consider that approximately 1/3 of Rio's inhabitants live in the Communities, and the vast majority of them work in various capacities in the heart of Rio's tourist and business districts. From this, it is quite apparent that the Communities and the people of them are very much part of Rio. Don't they stand out, you might ask? Of course they do! But not in the way you might think. We were told by natives that many of Brazil's better soccer players and most beautiful women are from the Communities. We can attest that the Communities contain soccer training grounds (i.e. muddy soccer fields), salons, and clothing boutiques. As such, when the people of the Community leave for an event in the city (as some were preparing to do when we were there) they are sure to impress. 

A third thing we can learn from the people of the Communities is to let children be children. Far too often children in the U.S. are saddled with the ups and downs and the ebb and flow of their parents' lives and professions (or the lack thereof). There is something beautiful and innocent about being a child -- naive to the intricacies of life, while at the same time learning important life lessons and the significance of sharing precious moments with friends, even if it happens in a game of table tennis or on a seesaw. In the interest of full disclosure, there was an alarming number of young, unwed parents. But to their credit, it was refreshing to see them joyfully accepting the responsibilities that came along with their life-altering decisions and doing all they can to make the best of a less than desirable situation. 

What can the people of the communities learn from us? Perhaps not as much as we can learn from them, but here's some background that sets the stage for at least one thing. While we were touring the Communities, a native told us that people in the Communities have three goals/expectations in life: (1) eat good/healthy food (they also love good drink), (2) good companionship, and (3) a flat screen TV. The third item shocked us, but it quickly made sense once we saw the myriad of satellite dishes (mostly HD) hanging from balconies and sides of buildings (see photo below). As we walked (tour guide-directed) through the narrow buildings, which extended into the bowels of the earth (and we were expecting hobbits to appear), there were combinations of authorized and what appeared to be unauthorized electricity conductors and conduits, as well as underground sewage systems connected to the multiple units in each building, even though sometimes it was hard to figure out how it is all connected, let alone functional.

So what is that one thing people of the Communities can learn from us. Take pride in where you are, but know that taking pride in where you are doesn't mean you have to stay there. It is possible to leave the community without the community leaving you. The sense of community is ingrained in those who grow up in the Community, so working to create a better life and a better environment is not betraying the sense of community one has been taught; it is remaining true to what one has learned. All it takes is one person to break generations of a vicious cycle and start a new legacy. After all, the houses that are upon houses that are upon other houses in the community all started from a single building. So as you can see in the image below, this is community of more than one million people living on a side of mountain, building edifices one on top of the other (with little to no adherence to building codes or rhyme or reason as to how and for how long the building will support such structures).  Yet they are a proud community and an economic force to be reckoned with. Yes, Rio would not be the same without the Communities. But imagine what Rio could be if the people of the Communities took the community mindset, left the social and infrastructural limitations of the Communities behind, and created a sustainable legacy consisting of a more inhabitable environment and higher goals for a better life. Now that is a Community worth building and visiting! In the interim, go visit the Communities in their current form (you will be changed) and hope for the Communities of the future that have the potential to be birthed out of the existing Communities. I know we will do both.



Photos courtesy of Margaret Ashworth, University of Tennessee

Back to Top


 

Tuesday, July 17, 2012

MBA programs are about the study of people and money.  You must excel in serving a customer and you must do it by hiring, training, inspiring and leading people.  You do this to generate a profit or if you are a public sector organization, to serve your stakeholders.  Our time in Brazil began with a focus on the people of Brazil – the culture, history, religion, dreams and ambitions of a great nation and a great people.  Today we shifted our focus to the financial elements of business. 
 
A morning visit to the management consulting and financial services company, Deloitte, provided us a great overview of the Brazilian economy.  We learned where it has been, how it works and where it is going.  We learned about the sometimes steep learning curve businesses climb to enter a new market. 
 
In the afternoon, we visited the Brazilian Development Bank, BNDES.  We learned of the critical role BNDES plays in the Brazilian economy.  They not only provide capital required for growth but they also work with the federal, state and municipal governments to help shape how that growth occurs, placing heavy emphasis on environmentally and socially responsible projects.  Through BNDES, the central government is much more involved in the Brazilian economy than what we find in the United States.  However, our visit highlighted how it works well for this nation and its people and fits well with their culture and values.  For almost 20 years, now, Brazil has had its worst nemesis, inflation, under control.  The nation was among the last to take a dip from the current recession, suffered a shorter fall than most and they have been among the first to show significant signs of recovery. 

 

Wednesday, July 18, 2012

Business . . . and aerospace—are soaring in Brazil. Tuesday evening we traveled by bus from Rio de Janeiro to San Jose dos Campos—the heart of Brazil's burgeoning A&D industry. SJdC is the headquarters home for Embraer, the world's third largest manufacturer of civilian aircraft. It's an A&D-friendly neighborhood, as the city is home to several Embraer suppliers as well as some of Brazil's top research universities and the nation's space agency. We couldn't see it all . . . but we sure tried hard.

For our first stop here, we visited INPE, the National Institute for Space Research. The visit was tremendous. INPE has three core missions:

• Aerospace products and services
• Industrial policy
• Knowledge diffusion

The Institute is both a research center and educational institution. Academically, they offer seven graduate degrees with an enrollment of more than 700 students and many, many more in their non-degree, short courses. They employ 1,000 direct employees to accomplish their mission, focused on six core product areas:

1. Atmospheric Sciences
2. Remote Sensing
3. Special Services—such as work on space projects infrastructure
4. Satellite Control and Tracking
5. Distribution and Utilization of Satellite Imagery
6. Industrial Policy

The INPE Director, Dr. Leonel Perondi, and five of his top assistants hosted our visit. Dr. Perondi provided a great overview briefing and shared valuable information about Brazil's view of the economic and social importance of aerospace and defense. First and foremost, leaders in Brazil understand that aerospace capabilities produce enormous, direct economic and social benefits. As just one example, Brazil uses imagery collected from its satellites to study deforestation in the Amazon rainforest. Recently, they have begun using the data to deter logging in the rainforest. Due to advancements in imagery capabilities and high speed computing, they now use satellite images to support law enforcement agencies working to enforce laws and catch and prosecute violators.

Dr. Perondi and his team told us that Brazil has a long-term, strategic commitment to excellence in the aerospace field. They say Brazil does not want to use wealth garnered from exporting commodities to high-tech, space products and services developed outside the country. Instead, they are striving to develop scientists and engineers of their own and do the knowledge work at home. They are determined to grow a robust supply of Brazilians capable of developing leading edge technologies and taking them to market, themselves. We were all very impressed by the openness and enthusiasm Dr. Perondi and his team showed our group during our visit. We also were happy to see their hunger to work with others in developing space capabilities where it makes sense and to work together with folks everywhere to advance aerospace science for the good of mankind. It is clear from our visit that Brazil understands the importance of excellence in the aerospace and defense sector. They have a clear, strategic vision for Aerospace and Defense excellence and they are skillfully pursuing it.

Embraer

After lunch we visited the top gun of Brazil's aviation industry—Embraer. They were started as a state-owned company in 1969 but privatized in 1994 to help make the company more innovative and market driven. The change paid off. Today, Embraer is a rising giant in the A&D sector. We all were impressed by their implementation of lean production practices. Several of us had visited their facility and seen some of their production operations before. They have recently but rapidly transitioned to the lean production processes of the Toyota Production System. As a core business, they design and manufacture regional jets, executive jets and military aircraft and technologies. Their business strategy is based on growing sales in executive aviation and aircraft for military and security customers around the world. They are doing all this in traditional Brazilian style, with a commitment to the best interests of their employees and the communities where they work. It was an honor to visit the crown jewel of Brazil's A&D industry.

Back to Top

 

Thursday, July 19, 2012

Today we worked our way down Brazil's A&D supply chain. It was a tremendous way to see how an industry goes from design to final product. After yesterday's stop at Embraer, we began today with a visit to one of their key suppliers, Aernnova. The company is headquartered in Spain with operations all over the world. Their company is very impressive . . . and their work spans the entire product life cycle.

Aernnova designs and manufactures parts and jigs and provides aftermarket support. Much of their work and revenue is earned in the design arena but their plant showed a very robust and impressive manufacturing capability. Their customer list includes all the giants—Boeing, Airbus, Sikorsky, Embraer, Eurocopter . . . to name just a few. Their facility in Brazil is closely linked to the success of their nearby neighbor, Embraer. Aernnova manufactures all of the wings for the ERJ 145 fleet. The plant here is very clean, neat and efficiently operating. We were all very impressed by the work going on here as well as the processes and technologies applied. We are blessed in this program to be received warmly and supported by A&D organizations and leaders all over the country and all over the world—each motivated to support the development of leaders in a vital industry they all love.

The Aernnova facility in Brazil has an interesting life story of its own. The site was opened in 2004 with a risk contract in support of Embraer—just as that company was transitioning from government-owned to a private company. Aernnova bet the Brazilian operation on Embraer's ability to compete and succeed in the highly competitive global aerospace market—it was a good bet.

Thyssen Krupp Automata

This afternoon we visited a Brazilian facility of a highly diversified industrial giant—Thyssen Krupp. Thyssen Krupp Automata is a joint venture between Thyssen Krupp and the Brazilian company, Automata. Thyssen Krupp is a global raw materials service provider. They have two major divisions to their company—a materials division and a technologies division. This particular facility is a 5-axis machine shop producing components for the wings, fuselage and empennage of customer aircraft. Thyssen Krupp entered the Brazilian market via the joint venture with Brazil's Automata as a long-term investment. They, too, see tremendous potential for growth in Brazil's aerospace industry and other sectors leveraging technology transfer. Thyssen Krupp leaders had the vision and stamina to invest in a location and an operation with limited short-term yield but they saw the "upside" of this nation and this market. They have been here developing strategic relationships and educating potential customers and policy makers on their potential value to Brazilian companies. Good things are already coming to Thyssen Krupp as a result of this vision and patience. We expect that to only grow bigger . . . much bigger, in the years ahead.

Back to Top

 

Friday, July 20, 2012

Sugar is sweet. In Brazil, sugar is also still the king. This morning we visited, UNICA, the business association for sugar cane companies of all kinds in the state of Sao Paulo. They attend to the collective business interests of member businesses in the sugar cane supply chain—which is a big one. Brazilian sugar is not only grown, harvested, processed, packaged and shipped to meet much of the world's demand for natural Snickers bars and birthday cakes, it is also a major source of fuel.

Brazil processes just about every form of byproduct from the harvest process and converts it into energy in one form or another. Some portions are burned to create a byproduct that is used as a fuel to run turbines to create the electricity used to power the sugar mills. They also use machines to extract the juice from other portions of the plant and distill it to make ethanol. Brazilians use ethanol to power their cars (in addition to petroleum) but also export it around the globe. UNICA's briefing and talk explained that sugar cane is the most environmentally sound and scalable source of bio energy—at this time. They concede science will identify other sources and eventually make them economically and environmentally sound to produce. Brazil hopes to be a part of that market, too.

While we were impressed by the explanation of the sugar cane supply chain and its economic and environmental dividends, we were even more impressed by UNICA. Some industries are just vital to the success of their nation's economy and way of life and require special attention and handling. In Brazil, that's sugar and petroleum. In the U.S., among others it's the aerospace and defense industry. Because of the strategic importance of maintaining the global lead in A&D technologies and business performance, companies work together through trade associations to work matters of common interest. UNICA serves this mission for the sugar cane industry in Brazil and we saw, first hand, the dividends they produce for their member companies and through them, Brazilian society.

This visit highlighted for our students and faculty the importance of strong, effective trade associations and intellectual communities serving the A&D industry in the United States. After visiting UNICA, our students understood, better than ever, the importance of the industry-supporting service of organizations like the Aerospace Industries Association (AIA), the National Defense Industrial Association (NDIA) and the American Institute of Aeronautics and Astronautics (AIAA). As rising leaders hand-picked by their employers for a very unique academic and developmental experience in ADMBA, many ADMBA students will be senior executives in their organizations in the near-to-mid-term. This visit helped prepare them to help lead and support these vital organizations serving "the common good" for the A&D industry. Leading business at the executive level means more than managing a plant or even a series of plants or balancing the books and working with a board. Business leaders have to appreciate the importance of trade associations and their responsibilities to support all kinds of broader teams to ever achieve and sustain excellence. It was a "sweet treat" to learn this lesson from an executive board room with a beautiful view of Sao Paulo, Brazil.

MN&F BOVESPA

Brazil is big . . . Brazil is also big business. Friday afternoon we visited the Brazilian Stock Exchange, or MN&F BOVESPA. We learned MN&F BOVESPA is South America's largest commodities and stock exchange and operates very professionally. They have and they leverage all the latest technology and offer most of the investment and trading products and services found in any of the top exchanges around the world. They execute trades very rapidly and they operate transparently. They are not just a business service but a business, themselves. They are executing a marketing campaign to get more Brazilian citizens comfortable with investing in their own stock market.

Leaders here spoke to us very openly and passionately about their market; where it is today and their vision for what it will be tomorrow. Their professionalism and knowledge certainly inspired our confidence. MN&F BOVESPA will be a key piece of the puzzle as Brazil works to achieve the ambitious but highly possible global stature they desire and deserve. It seems to be in good hands with the team here.

Back to Top