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Business prospects in a competitive world.

A GREAT MAJORITY of NABE members are involved on a daily basis with businesses that pursue growth and, in doing so, pursue new markets. I would like to propose the following: most of our companies, and business sectors as a whole, are already deeply involved in international markets, and many have been for some time. Our interest, then, is not whether, but how, or, more likely, "How to do more, better."

In pursuing international markets, American business sees, and will continue to see, both significant opportunities and multiple barriers. In the words of one wag, we are "faced with insurmountable opportunities." Let me suggest three kinds of issues or challenges, arranged simultaneously in descending order of management control or ability to influence, and ascending order of risk and uncertainty.

INTERNAL ISSUES

The first set of issues are those internal to our various companies. Inside American business, there lurks a whole spectrum of constraints to success in international business. In the 1970s and 1980s, we heard much talk about firms that simply did not know where to start, having had no real experience doing business abroad. While many companies have overcome that hurdle, others remain trapped--they feel they can't or won't do it because they haven't done it before. Facing up to and meeting that challenge, then, is still a need for some U.S. firms.

A second internal constraint to international business success, especially for newcomers to this playing field, is what my air force friends call a "target-rich environment." Growing awareness of more and more opportunities has in some cases been a detriment, and some of us have seen businesses lose focus, spread themselves too thin, or simply trap themselves in an endless series of business plans, exploratory visits and studies, and marketing feelers. The need to choose and carefully develop priorities, as always, remains crucial. My third internal barrier is one that might best be labeled "I'll never make that mistake again." It was Sam Walton, reportedly talking to business school students, who was asked to name the single most important factor in his becoming a billionaire. Without hesitation, he answered, "Good decisions." After a moment, a student came back with "How did you make those good decisions." "That's easy," replied the famous retailer, "experience." "Okay," said a student, "how did you gain the right experience?" "Only one way," said Sam, "bad decisions."

Both of the Fortune 50 aerospace giants where I worked during the 1980s and 1990s made major forays overseas in selected commercial markets. After years of awful financial performance, both of those companies threw in the towel and either divested or simply dismantled those particular businesses. To this day, there is strong aversion in those two front offices both to those markets and even to those businesses. The "I'll never make that mistake again" mode may legitimately deserve a place in Sam Walton's "good decisions" column. For some of us, though, it may be an unfortunate constraint to future international growth.

My final internal constraint is in my view the most dangerous and pernicious one at work today. Simply stated, the current under-achievement and performance malaise found in many corners of American business has for at least three to five years now generated an intensely inward focus. That focus--however important and necessary--in turn has made expansion in general and international expansion in particular a low or even nonexistent priority in many corporate strategies. Until we see a stop to the proverbial bleeding in overall performance and a slowing in the long string of restructuring and cuts in developmental expenditures, these companies have little prospect of significant new international success.

GOVERNMENT'S ROLE

My second major category of issues involves governments' role in U.S. business' efforts to succeed internationally. For the most part, it is the federal government that has the greatest role, although state and local issues can be significant. My aerospace experience has made me acutely aware of the competitive advantages and disadvantages than can arise when companies arrive at the foreign customer's door with widely disparate degrees of support from the sellers' two respective governments. In my view, our federal agencies were for many years truly noncompetitive. In recent years, though, there have been slow, steady improvements--at State, Commerce, Labor, Exim Bank, and elsewhere. At the risk of raising an age-old political debate, let me offer a prescription to generate continued real improvement in U.S. government support for American business abroad. For those on the left hand side of the political spectrum, we need to see acknowledgment and understanding of a logical connection and causal relationship between the goals of job creation and growth in living standards on the one hand and the necessity for growing, profitable, internationally competitive U.S. companies on the other.

On the opposite side of the spectrum, the political right must likewise reflect on the government/industry relationship. In their framework of "less government is good government and almost no government is perhaps best," room must be made for positive, proactive help to U.S. firms competing abroad, and done not just in rhetoric but in practice, in both policy and budgets for consulates, missions, and other support abroad.

Even as the mega-issues like NAFTA or most favored nation status continue to occupy the political spotlight, we and our companies need to keep plugging away at the basics. Supportive government policy and law in areas such as investment, tax, insurance, export controls, and financing improvements come only if we push, and good old fashioned marketing and sales help from our embassies and consulates abroad likewise require that we ask for that help in each specific instance.

FOREIGN MARKETS

By now, you have probably figured out that my third key set of determinants of international business success are those resident in the foreign markets themselves. The existence of that "target rich environment" is not a secret, and entering the marketplace in certain popular countries abroad can be much like Missouri's Ozark streams on opening day of trout season. Those of you who have traveled to the former Soviet Union in search of business opportunities in the past two years know what I mean.

Even in recent memory, the changes in many countries' overall climate to accept U.S. companies has been quite positive. The contrasts to the past are in some cases profound. For many foreign governments, the bad old days of onerous import restrictions, endless red tape, and excessive taxation on capital transactions have been replaced not just by moderation but often by genuinely facilitative rules and implementation. I have recently seen a very graphic example of this in my own new job. In looking at an opportunity in a certain long, thin, mountainous country in South America, I was immediately reminded of the awful years of the 1970s, where expropriation and litigation were the buzzwords of the time. As any of you in the mining and metals industries can attest, that hostile environment has done a complete 180 degree turn. As a result, a number of nations south of the border reflect a combination of economic growth and, for certain U.S. firms, strong profitable business. As we look at a number of nations and regions in 1993, we are really still waiting--as in the former Soviet Union--to discern just how stable and supportive the respective governments appear to be. As we look at these opportunities, some basics are worth noting.

In order to succeed internationally, American companies require not only a positive climate in which to conduct business. We also require a market ready and able to purchase new goods and services. Just as I was recently taken aback by the Chilean example of change I just mentioned, I was likewise surprised--shocked would be more accurate--to see an example of equally radical change on the market side, one which had a particularly personal element. In 1981, I and other General Dynamics executives wandered the cities and government halls of the People's Republic of China trying to sell telephones. As you may recall, U.S. business was infatuated by the prospect of cracking a market with one billion new, untapped customers.

Although I did manage to sell a few Stromberg Carlson local switches and a few hundred receivers for selected government and hotel uses, the magical Chinese megamarket remained for the most part impenetrable and mysterious. Imagine my shock and admiration, then, when I recently read about the people at Motorola who, after selling 1 million pagers in China in 1992, hit 2 million in the first half of 1993 and are forecasting a total of 5 million by year end! Now that is impressive.

While all of these observations this morning regarding international environment and markets have a positive twist, I have, perhaps, saved the worst for last. As a friend from AT&T quipped during the breakup of the Bell system, business is hard enough without having to worry about competitors. Many of us, to varying degrees and for varying reasons, have benefited from just that enviable circumstance, especially in certain international markets. For example, I have just left an industry that has sold over $100 billion in aircraft, missiles, and other armaments abroad, often in situations where there was literally no other supplier or product in competition.

Sadly, those have become the good old days. From aerospace to automobiles, from financial services to engineering, we have genuine non-U.S. competition. Even as some of us are beginning to feel somewhat successful at negotiating all three categories of hurdles noted this morning, capable competitors--both within target countries and from third nations--are becoming more and more formidable. CONCLUSIONS

In sharing these thoughts with you today, I have to a degree outlined my own approach to my brand new duties at Insituform. The three categories of issues are for me a straightforward structure for strategy and goal setting. We will ourselves focus on internal company approach and culture, U.S. government environment for business, and international markets themselves in developing specific actions.

The insurmountable opportunities I referred to at the outset make it more exciting for all of us as we come to work each day. While international business brings many special challenges and constraints, it at the same time harbors genuine opportunity. For those of us with a long view, it is an essential part of establishing and sustaining competitive advantage.

E. Randolph Jayne is President, Insituform, St. Louis, MO.
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Author:Jayne, E. Randolph, II.
Publication:Business Economics
Article Type:Transcript
Date:Jan 1, 1994
Words:1735
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