The Year For America To Go Global
Place your bets, Corporate America! There has never been a better time to play the global marketplace by exporting or investing overseas. Whether it's to satisfy the consumer demands of the growing middle classes of Asia and Latin America or to stake out positions for the 1995 economic upturn in Europe and Japan, this is the year to go global.
Why the rush? For the first time in maybe 20 years, the U.S. has the most competitive economy in the world. Germany and Japan, economic Olympians of the 1980s, find themselves in the 1990s with costly, inflexible work forces, overpriced products, and slow-moving corporate bureaucracies. Sound familiar?
As European and Japanese companies struggle to restructure, U.S. corporations are reaping the benefits of their own painful downsizings of years past. Productivity is way up, quality is back to world class in many cases, and disinflation is keeping costs under control.
Even the politicians are helping for a change. Thanks to the Clinton Administration's budget deal with Congress, interest rates are low and the federal deficit is plummeting toward $190 billion, down from $290 billion in fiscal 1992. With interest rates down and stock prices high, the cost of capital hasn't been so low since the early 1960s. The deficit-cutting bill has had an enormous impact. It's not something that should be taken for granted. Neither should the market-opening efforts of NAFTA and GATT.
Not many years ago, business and political elites around the world were reciting a three-part catechism: Japan's keiretsu system is unstoppable; Germany's social compact is enviable; American industry is hollowing out.
Myths, one and all. A strong yen and a deflating "balloon" economy are slowing Japan's onslaught and remaking its economic system. Today, Motorola, IBM, and Sun Microsystems are manufacturing products for Pioneer, Mitsubishi, and Hitachi to sell under their own brands. Matsushita Electric Industrial can't afford to make appliances in Japan anymore, so it assembles them in Thailand and Malaysia. Even keiretsu, it seems, have their limits.
In Germany, workers are being told they are too high-priced and too inflexible in their work rules. Wages and benefits are being cut, and factory hours made more flexible. So much for the German social contract.
As for hollowing out, the Midwest revival attests to the resiliency of American manufacturers and the flexibility of the U.S. workplace. Komatsu, not Caterpillar, is under pressure today; Daimler Benz, not Ford or Chrysler; NEC, not Intel. Indeed, U.S. companies are pioneering the next technological revolution, the Information Superhighway.
Corporate America played defense for most of the past decade, restructuring while protecting domestic market share from highly competitive Japanese and European economic rivals. This year, American CEOs should take the competitive fight overseas: 1994 is the year to play offense.
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