MKT 509 INTERNATIONAL BUSINESS DR. SANJEEV AGARWAL Professor & Dean’s Fellow, Marketing Iowa State University 3137 Gerdin Business Building 515-294-9822 firstname.lastname@example.org www.bus.iastate.edu/sagarwal/mkt509 GLOBALIZATION Challenges for America and the World! U.S. Merchandise Trade Balance: downhill since 1971 100 Billions of U.S.Dollars 0 -100 -200 -300 -400 -500 -600 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 Sources of pain: in 2003. -55 169 224 $b 118 165 -66 -101 152 -124 52 266 28 97 138 -41 In the 70s and 80s, the culprit was Japan! They sold us their products. And, they bought our companies. They were not alone though. Others came too. Japan just happened to be there at the wrong time (and more visible). 120 Billions of U.S. Dollars 100 80 U.K. 60 Japan Germany 40 Netherlands 20 Canada 0 -20 87 89 91 93 95 97 99 01 19 19 19 19 19 19 19 20 So, America pleaded… The corporate world supported… Anti-Japan feelings were revived... So, the U.S. put pressure on Japan to import… It did some good! You could see American food products in Japanese retail stores. Then, the big three went to Japan... they whined... Chrysler CEO Lee Iacocca: “They say all the problems are our fault. That’s like blaming our Army and Navy for Pearl Harbor because we weren’t ready. No, we don’t have to show any more patience toward Japan. None.” and, whined... GM CEO Robert Stempel: “(In America) we gave our distribution network to Japan. Our best dealers sell Toyotas and Hondas. We’d like the same reciprocity. We are not asking that they give us anything.” and whined. Ford Motor CEO Harold Poling: “They (Japan) have had an essentially closed market for 40 years. It’s time for it to open. When all of the auto manufacturers in the world can get less than 3% of a seven- million vehicle market, something is wrong.” Sure, something IS wrong. Honda CEO Nobuhiko Kawamoto: “The Americans say that their automobiles are as competitive as other makes. This message has not been properly transmitted to the Japanese customers.” It’s quality, stupid! Nissan CEO Yutaka Kume: “…I want Americans to stop saying there is an imbalance because Japan is unfair. The U.S. must make more efforts.” “…in the future…even if the cost is a bit high, we may accommodate American suppliers. But not if the parts are of low quality.” Is Corporate America serious? Toyota President Hiroshi Okuda: “The only Americans serious about selling cars in Japan are the politicians. The way they’ve conducted operations is stupid.” Is this the job of politicians? Did the CEOs know Japanese put steering on the “wrong” side? And drove on the “wrong” side? and needed smaller cars! Never mind! It is easy to complain than to do something. Steel industry is expert at that. In 90s, we encountered more problems--Mexico…and China 0 Billions of U.S. Dollars -20 -40 -60 China -80 Japan -100 -120 -140 1991 1993 1995 1997 1999 2001 2003 They use prison labor. ... crush democratic rights of their citizens, And pollute the environment. So, we should not trade with them or others like them! Noble Sentiments. But, Politics and Trade don’t Mix. Let us not blame others for our failure to: make what they need/want, sell them where and when they want, figure out what motivates them to buy. And, more importantly, Let us not blame others for the imbalance in trade. It is our desire to buy from them. They are not forcing us to buy. Corporate America: Please, “No excuses”. The biggest barrier that exists for U.S. firms is the attitude of the American CEOs. Learn from those who are winning. • Kodak • Levi’s • McDonald’s • Pepsi • CocaCola • Citibank Many of the best in the world are American companies! 1 Pepsi (U.S.) 7 Johnie Walker (U.S.) 2 Coca Cola (U.S.) 8 Maggi-Knorr (Swiss) 3 Nescafe (Swiss) 9 Guinness Book (U.K.) 4 Nivea (Germany) 10 McDonald’s (U.S.) 5 Chanel (France) 11 Philips (Netherlands) 6 Levi’s (U.S.) 12 Gillette (U.S.) U.S. Exports have risen! 15% 5% South America 20% Canada 20% Japan 1991 Europe 11% 421 $b Asia-Rest 29% Rest South America 14% 3% 8% Canada 23% Japan 2001 Europe 719 $b 20% Asia-Rest 8% 24% Mexico Scorecard: The Winners • Pharmaceuticals A • Forest Products A • Aerospace B+ • Chemicals B • Food B • Scientific Equipment B • Petroleum Refining B and the losers. • Motor Vehicles C • Metals C- • Consumer Electronics D But, the threats from low cost countries are real… They know what the West wants. Where and when it wants. And, what makes it buy! We can’t afford to react. WE HAVE TO BE PROACTIVE! Understand the drivers of Globalization Travel Communication Media Digitization Where should we start? • Learn about Geography.. • Learn about the history, leaders, and their views.. • Visit them… • Notice the differences… • Observe the people... • Check out the competition... If you interested in going global, Then say: “I feel at home (anywhere).” “I love this place.” “I love the people.” “I will persevere.” “I will go after that elusive customer.” They have the same needs. They want to feel special too! They want to look pretty too! And, who doesn’t want to buy the very best in the world? And, they have money! So, adapt and reach. Learn the rules. Figure out the logistics. Find a partner. Even giants do! Be prepared to face resistance. Research the markets. Plan and take action. Become an insider.
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