Summing Up
Krishnamurthy suggested that a return of mercantilism is not a threat, and that "the present dilemma is probably an aberration that will taper off in due course." Alejandro Ocana stated bluntly, "Global initiatives must grow more than ever before."
Respondents raised an interesting concept of the importance of a "national brand."
—Jim Heskett
Others, while agreeing with this thesis, were not so sanguine about whether this will happen without greater efforts to influence foreign policy by leaders responsible for global business initiatives. Michael Butler states, "Now is the time to face the facts. Our brand" (apparently referring to the U.S.) "is in decline in parts of the world." Stating that " ... 'manifest destiny' is a dead concept," Bob Nemens suggested that "those companies that are respectful and aware that in the global village the villagers drive the economy should be more successful." Flavius Chircu said that "... business leaders should get together with political leaders and figure out where and how to compete."
Amadeo Isart was even more direct in commenting that "It is the responsibility of business leaders (in both the U.S. and E.U.) to take charge of the situation. We cannot allow politicians to act alone in their never-ending quest for votes and popularity." C. J. Cullinane, without being specific, provided what may be an appropriate "tag line" to these comments when he said, "Global initiatives should not be devalued but should be re-evaluated with some new criteria."
Respondents raised an interesting concept of the importance of a "national brand." This suggests another set of questions. What is it that comprises a national brand? Who's responsible for a country's national brand? To what extent is it an important factor in determining the general success of global business initiatives? If it plays a critical role, to what degree should the world's business leaders be involved in brand building processes? To what extent should they take responsibility for building the brands of several countries in which they do substantial amounts of business? And just how is this done most effectively? What do you think?
Original Article
Recently we've been witnessing a public debate about concerns ranging from what some perceive to be a fundamental shift in U.S. foreign policy to appropriate worldwide responses to such things as terrorism and twenty-first-century plagues. Based on an unscientific sample, is it my imagination or is it possible that a more muted but related conversation is taking place among executives of firms with global interests—one that centers around the impact that these phenomena may have on such things as the potential benefits and costs of doing business abroad?
Specifically, will questions increasingly be asked about whether strategies for foreign investments should be altered to reflect what some perceive to be a narrowing between the rewards and risks of such ventures?
Whether because of reduced market expectations or increased transactional costs resulting from deteriorating international relations, tighter regulation and security restrictions, the outbreak of tariff skirmishes, expected reductions in productivity gains, or simply a decline in trust among some North Atlantic trading partners, the discussion seems to be occurring with increasing frequency. Boiled down to its simplest level, the underlying question appears to be whether or not global business initiatives should be devalued.
On the one hand, one might argue that such discussions are an overreaction to current events, that nations have become so interdependent and multinational business organizations so vital to the world's economy that there is no turning back from generally freer trade policies, and that with a return to a more normal world order, global business initiatives will become even more valuable.
If, however, current geopolitical events are merely symptoms of a greater and longer struggle with forces seeking to disrupt the world order, will we begin to consider a concept that, until recently, has been unthinkable: that global initiatives in many cases should be devalued, discounted, or postponed in relation to more predictable business investments "closer to home?" What do you think?
As a global financial conference organizer based in NYC, I am finding it increasingly difficult to argue for continued growth in foreign markets. Not only are terrorism and communicable diseases causing North Americans to hesitate traveling abroad, but also citizens of foreign countries are looking for more "native" conferences.
What I mean by "native" is that two years ago, everyone wanted to hear from U.S. financial heavyweights. Now, that's not the draw. Internal issues in Japan, for instance, do not require hearing from U.S. financial gurus. Solving those issues requires Japanese financiers and government officials speaking to Japanese investors. No need for a North American presence. I find this reaction in Europe, Asia and Australia as well.
I also find it more difficult to secure sponsorships for these foreign events as many of our sponsors are not as aggressively pursuing investment in these foreign markets. There are many reasons for this, but I feel the largest obstacle are the geo-political risks in non-European foreign markets. Companies are not willing (or cannot afford) to pay the risk premium anymore, so they're pulling out or at least waiting to move forward.
In my business, growth really does come from international expansion, but we may have to acknowledge that, at least for right now and probably the next couple of years, we have to limit our foreign growth expectations.
The current geopolitical situation is complex, but in reality no more complex than it was 10, 40 or 200 years ago. Five hundred years ago, Spain and Portugal shared world domination. Today it's the U.S. and the E.U. Granted, they may not share the same points of view, and in some instances, the differences are acute. Nevertheless, the U.S. and the E.U. depend on each other to grow and cannot ignore each other. It is the responsability of business leaders to take charge of the situation. We cannot allow politicians to act alone in their never-ending quest for votes and popularity.
The current state of flux in international business calls for caution. The sight of demonstrators in Brazil outside a McDonald's (a symbol of the U.S.), the anti-Americanism in France and Germany, and the instability of the financial markets around the world all point to a period of drastic change in the world marketplace.
The vast markets opening for international trade hold greater risk now than just a few years ago. Caution and due diligence should be used more now than ever.
The financial upheavals of the last few years also call for caution as more countries become protective of their trade, markets, and currencies.
Global initiatives should not be devalued but should be re-evaluated with some new criteria.
The U.S. as a whole is in a natural progression to globalization. It is a matter of managing the tactical fine-tuning and, more importantly, of identifying the needs in order to know what is next.
Remember when Tony Blair tried to brand Britain three years ago? As a brand, America's image in the world is suffering in places and is under attack in others. Particularly in areas of consumer marketing where branding is important, America's companies could suffer.
But seriously, are Hollywood, Nike and McDonald's really going to retreat from the world or are they just going to become more sensitive to these branding issues?
And if you think America's companies are safe in fortress America, well, talk to the airline companies.
The answer for Americans is engagement, not isolationism. I mean, after all, what brand is successful by turning a deaf ear to its customers? American companies have lived off a great brand image since WWII. Now it is time to face the facts. Our brand is in decline in parts of the world.
So before we start fencing off the world into friends and foes (Japan over here, Malaysia over there; oops, where do we put Korea?), I think it might be appropriate for companies to start thinking about our national brand and consider how our brand image can be improved.
Global business investments should not be curtailed due to the present, temporary happenings in world events. Each company's strategy will of course have to adjust to circumstances in the countries in which it conducts business, but world trade should continue, and aggressively. There is no reason to cede international markets to other foreign adversaries who will surely pursue the business. The advice remains as it has always been, to develop domestic markets first and foremost, but expand to international markets when production capabilities and expertise exists to service them.
Let us assume for a moment that the scenario does take us back to the era of
mercantilism, so each country tries to increase exports while curbing imports. Is it possible for us to imagine the consequences of such an eventuality on humankind?
It is apparent that no country, however technologically advanced or prosperous economically, can afford to be an island in the community of nations. Is it conceivable that a firm would be able to procure all the inputs required in the home country and market all its output also likewise? What would happen if a country does not have some critical inputs at all? (Indeed, this is the case with many countries including Japan.) What would be the impact of the Internet, which has effectively created a boundaryless world?
Therefore, the premise that firms might start rethinking their global strategies, tempting as it may seem, is unrealistic. It is difficult to imagine how the largest corporation in the world, Wal-Mart, would be able to have a business model based in USA alone.
The present dilemma is probably an aberration that will taper off in due course. Ideally, we should be looking at a world in which mobility of all factors of production would be a reality, with sufficient checks to ensure that such mobility is neither misused nor abused by anyone.
I suspect that the more U.S.-centric the company is in both operations—but more importantly, in mindset—the more trepidation about moving abroad. The latest war shows signs that rebuilding Iraq with the premise of traditional American capitalism may not prove to be as welcome or effective as in post-WWII Europe—which is the mindset of many American executives. It is clear that those companies that are respectful and aware that in the global village the villagers drive the economy should be more successful. The degree and quantity of diverse cultures that pumps through the television on the evening news is in direct proportion to the need for businesses to emphasize the unique regionality of business development outside of the U.S. Alas, "manifest destiny" is a dead concept.
There is not a single answer to this question. A lot depends on the environment in which a certain enterprise operates (size of its international operations, market maturity at home and overseas, industry in which it operates, etc.).
What seems certain to me is that the route to globalization is a one-way road. As time passes, markets are becoming more and more international. So, the long-term objective of each enterprise should be to extend its global reach. I also believe that there are more opportunities for improved returns of major investment projects in the current unpredictable environment compared to the dot-com euphoria of the '90s.
As a lot of opportunities are cutting down their trade initiatives (new product/service introductions, marketing spending) because of the weak stock markets and uncertain business environment (Gulf war, oil prices, etc.), there are significant opportunities for companies with adequate cash flow to increase their global market share through M&A, NPDs and sales promotions.
I would like to propose a couple of scenarios:
1) I don't think the actual political leaders have spent the time to analyze the effects of projecting military might at the expense of economic gains. Indeed, the crumbling of international institutions and agreements can break a "social contract," however imperfect it may be, and consequently the consumers could revolt against the hegemon-like U.S. brands. Thus, the business leaders should lobby as hard as anyone else in favor of a position that takes business interests into account.
2) Arguably, a showdown between the E.U. and U.S. has been in the cards for some time. For example, the E.U.-boycotted merger between General Electric and Honeywell or the European voices that question the size of the U.S. deficit or the increased trans-Atlantic pressures surfaced at the WTO. The current situation is just the catalyst. Even in this case, business leaders should get together with political leaders and figure out where and how to compete—in other words, to redraw the rules of the game.
Global initiatives must grow more than ever before.
Business world growth is basic to confidence, so we have to increase that confidence through the world while avoiding whatever action creates uncertainty.
Our thinking, behavior, and business actions have to change with the international environment. We have a strong responsibility for the future of the entire world. We must integrate the different points of view of different cultures in our new businesses plans. Our businesses must grow without fear but also have to be prepared for different contingencies such as terrorism and plagues.
Maybe someone should create a global business simulator whereby we can measure the impact of business decisions, political decisions, and so on, and be able to avoid the bad decisions.