Firms Need to Flex Extra Muscle Abroad
American corporations are putting themselves through the wringer, hoping to come out the other side more competitive. One question, however, is more competitive with whom.
It is a question because American business has had a notable lack of interest in competing in any market but the United States. The idea of tackling world markets has had low priority.
For years, this attitude reflected the size and rapid growth of the U.S. economy. Economic opportunities elsewhere seemed small by comparison and costly to exploit. More recently, the hesitation has been the result of the dollar’s high value--which makes U.S. exports expensive--and the uncompetitive, high cost of operating within the United States.
Now that the dollar has dropped some in value and American companies have begun doing something about those high costs, their next step toward regaining full health is to become more international-minded, identify markets around the world, and mount campaigns aimed at capturing them.
Major Japanese companies have been doing this for years, and their successes are being copied by emerging corporate giants in such places as Taiwan and South Korea. American business must play in that league or wind up as a second-rate power in the world.
Wrongly Blame Dollar
In a study earlier this year for the Joint Economic Committee of Congress, Wendell H. McCulloch Jr., professor at Cal State Long Beach, pointed out that U.S. firms often wrongly blame the dollar for their international trade problems. Yet the last time the dollar was relatively weak, the period between 1977 and 1980, American firms failed to take advantage of the situation with aggressive pricing.
The same thing could happen now. In some industries, there’s no question that a cheaper dollar will help. Dow Chemical figures that it lost most of its $100 million-a-month export business to the dollar’s rise. Now it will take maybe only another 10% drop in the dollar, on top of the 10% to 15% that has occurred already, to get most of that business back.
It won’t be so easy in some other industries with little export experience. Many steps are needed that don’t directly involve exports but that can move U.S. companies back into position to compete overseas.
For one thing, U.S. management can pay more attention to running factories and making products and less to managing money. Thornton Bradshaw, whose comments appear on Page 3 of today’s section, blames business schools for turning out graduates with this mentality. The RCA chairman contends that the real action isn’t in the trading rooms of the investment banking companies but on the factory floors.
For another, companies must free themselves of some of the shackles of the annual budgeting process to leave enough flexibility for risk-taking. They need to develop innovators in their ranks and not expect instant return. In fact, they must be ready to let people fail. Most of the giant strides in technology for which America became famous came after considerable risk and trial and error.
Use New Technology
Corporations also must have the courage to try new technology in their operations. While U.S. companies demur, producers overseas are introducing such things as robotics that may be expensive initially but can result in major savings over the years.
Finally, U.S. business should campaign for more government cooperation. Bradshaw, in his remarks, argues for temporary trade protection. That’s risky, because temporary too often becomes permanent and, as it did with the steel industry, protection removes an incentive for immediate cost-saving efforts. What the government can be asked to do is help mount an export effort, ease some antitrust restrictions if U.S. companies need to join forces in competing for business abroad, streamline financing and other support for export business and enforce more evenly laws against illegal competition from foreign firms.
It will take time to regain a competitive place in world markets. The restructuring that many companies are putting themselves through today is a beginning--but only a beginning.
