VIEWPOINTS : U.S. Must Return to Offense in World Trade Game

“The best defense is a good offense.” That bit of coaching advice from American football was one of the first lessons I learned after coming to the United States from Japan as a teen-ager in 1958.

Today, I believe it’s the very slogan that our U.S. manufacturing and service industries should adopt. We must get back on offense if we are going to succeed in the international economic struggle with Japan and the rising industrial powers of South Korea and Taiwan.

The United States cannot afford to abandon its manufacturing capability. By sending manufacturing overseas and replacing it with a “service economy,” the United States may create a vulnerability for itself from which it may be difficult to recover.

Let’s face it: America’s glory days of dominating global economics, technology and industry are over, or at least on the wane. We are on the defensive. The days when we could dictate economic policy to the world are gone.

While all great civilizations gradually reach a peak and decline, we seem to have accelerated that natural process in the United States by economic short-sightedness. We became lazy. We concentrated on short-term profits. We became insensitive to our customers and spurned the international markets. And we have tended to make excuses when confronted with our errors.

But how our current situation has come about is not nearly as important to know as what to do about it. Even the foreign governments that are capitalizing on our weaknesses want the United States to remain strong.

To get back on offense, we must do several things: face up to our economic weakness; begin capitalizing on our strengths, which include a great deal of creativity, ingenuity, inventiveness and intelligence, and build strategic alliances with our trading partners (i.e. the competition) to take advantage of their strengths, especially in manufacturing.

Examples abound of American companies that individually have recognized our plight and are taking steps to overcome it. They include General Motors, IBM, Young & Rubicam and Goldman, Sachs to name just a few.

General Motors’ joint venture with Toyota to produce small cars in Fremont, Calif., is just one of 10 such alliances that it is forging with various Japanese firms. GM’s strategy is to capitalize on the production know-how of Japanese manufacturers, who are producing higher-quality goods and doing so more efficiently.

In adopting this strategy, the giant American auto maker is using its tremendous financial resources as a lever, in effect, to co-opt a key competitor and regain a foothold in the small-car market.

By working closely with Japanese managers, GM also can learn about Japanese culture, ideas and business practices--gaining insight into the Japanese market before trying to penetrate it directly.

Even small companies can follow a similar strategy. Some already do. ProQuip, a small San Jose manufacturer of integrated circuit test equipment, has used its edge in technology to gain access to the entire Japanese integrated circuit industry. ProQuip did it by forging a link with a major distributor, Shinko Shoji Co.

In return for making Shinko Shoji its exclusive distributor in Japan, ProQuip also received an infusion of venture capital from the Japanese firm.

Another strategic alliance has been created by Young & Rubicam, which has teamed with Japan’s largest advertising agency, Dentsu, to create the world’s biggest ad agency.

There are many mutual advantages. Dentsu knows the Japanese manufacturing companies well but is not as expert as Young & Rubicam in creating ads for their growing product-marketing efforts in the United States and elsewhere outside Japan. Young & Rubicam already has the expertise, the staff and the contacts to serve this “outside” world but doesn’t have direct links to Japanese manufacturers.

Investment powerhouse Goldman, Sachs is forging another alliance with Sumitomo Bank, which is its new 10% partner. Beyond the capital infusion, it is an opportunity for Goldman, Sachs to penetrate the growing Japanese market for investment banking and other financial services. For Sumitomo Bank, the coupling is an opportunity both to become more sophisticated about such services and to be first in offering them to clients in Japan.

IBM has adopted a different strategy but one that is likewise proving effective. It has gained a foothold in Japan by establishing a manufacturing subsidiary. As a result, IBM is successfully competing head-on for a share of the growing Japanese computer market.

That success doesn’t derive, however, from selling its U.S.-designed products.

Instead, IBM has taken the initiative and done what any good manufacturer and marketer must do: It has made a real commitment to the new market by adapting its manufacturing to the needs of the new customer base. IBM-Japan sells products that were developed in Japan specifically for that market.

Most American companies concentrate too heavily on domestic markets and too little on international opportunities. Today, most of the untapped markets--the growth areas--lie abroad, not in the United States.

Even Japan has now begun to open new markets as a result of its own international success and pressure from the United States and Europe. South Korea and Taiwan are also building foreign reserves and thus can afford to buy U.S. goods.

Moreover, Japan’s trade deficit with the United States has encouraged Japanese industries to set up manufacturing operations here, such as Honda’s auto plant in Marysville, Ohio.

For any company, tapping these foreign markets takes a great deal of study and hard work--and time as well.

Remember how long it took the Japanese auto makers to crack the U.S. market? It wasn’t fast or easy, but they persisted even as the months stretched to years and the years to decades. In short, they made a solid commitment to this market.

They were willing to forgo short-term profits and were patient enough to woo and win customers. Many American companies find it difficult to make a true commitment to serving customers and even more difficult to forgo short-term profits.

In financial services and investment banking, a number of U.S. firms, including Salomon Bros., Morgan Stanley, Merrill Lynch and Shearson Lehman Bros., have aggressively entered the Japanese market to float corporate bond issues and other commercial paper for Japanese companies. At the same time, they are introducing Japanese corporate managers to merger and acquisition strategies and to other services thatthe U.S. firms sell most profitably.

The lesson should be clear: While once the Japanese learned from us the techniques of mass production and mass marketing in order to boost their economy, today we can learn from them.

The ethic of hard work, persistence in the face of difficulty, forming and using strategic alliances, having a world-market outlook and adopting a business philosophy which proclaims that “the customer is always right” are admirable ideas and worth emulating.