The World Makes Business Go Round

Mazda’s MX-5 Miata sports car, when it came out to rave reviews in 1989, wasn’t just a gem of modern design. The two-seat roadster was also a marvel of international business collaboration.

It was designed in Southern California, financed in Toyko and New York, developed as a prototype in England and assembled in Michigan and Mexico.

So when Germany’s Daimler-Benz AG announced its plans to take over America’s Chrysler Corp. last week, it marked what would be the world’s biggest industrial marriage but hardly a revolutionary step in globalization.

Big business is already a booming, pervasive global force, fueled by massive capital flows and ever-more sophisticated technology. Hollywood’s “Titanic” has broken box office records domestically and overseas. U.S. pension firms manage retirement funds for Japanese conglomerates. And Indian engineers in Bangalore design new software for Silicon Valley.

The main change now, amid the Daimler-Chrysler international mega-deal, is that the stakes and hazards are getting bigger. And this trend toward global mergers is expected to accelerate because of the hunger among cash-rich U.S. and European businesses for new markets and the development of technology that helps giant companies operate nearly seamlessly across borders.

“The time is really ripe here,” said Byron Auguste, a senior manager at McKinsey & Co., a global consulting firm, adding that the planned Daimler-Chrysler merger “could not possibly have worked 10 years ago. This is a milestone of how far our ability to globalize companies has come.”

This transformation, however, poses complicated challenges not only for the executives running multinational businesses but also for national policymakers. They are rethinking their ideas of national economic security and revising antitrust policies, tax regulations and training programs to prepare workers for the next century.

For ordinary Americans, the implications of globalization appear huge: U.S. professionals, such as engineers and computer specialists, will enjoy increased opportunities abroad but also feel stepped up competitive pressures from talented foreigners willing to work for less. Automation and technological advances will leave the poorest, and least skilled, American workers even further behind.

American Commerce Can Move Overseas

A recent McKinsey & Co. study showed that 10% to 15% of the U.S. gross domestic product involved services that could be transferred overseas, thanks to advances in computers and telecommunications. Already, workers in Ireland are managing funds for American insurance firms. And the Philippines has become a major animation center for Hollywood studios.

While blue-collar factory workers have lost jobs for decades to lower-cost foreign operations, “U.S. knowledge workers are going to get exposed to competition in ways they really haven’t before,” explained Auguste, who conducted the survey.

Yet the subdued reaction in Detroit this week to Daimler-Benz’s acquisition of Chrysler, the nation’s No. 3 auto maker, seems to reflect a growing public acceptance that the “border-less world” championed by Japanese management guru Kenichi Ohmae is increasingly the world we live in. It is a world in which goods, ideas and capital move across national borders with ease.

It’s a far cry from a decade ago, when the purchase of such trophy real estate as Rockefeller Center in New York and California’s Pebble Beach by wealthy Japanese investors ignited a heated national debate over the “selling of America” and Japanese economic imperialism.

While those concerns reflected widespread fears about the decline of American economic preeminence, it also demonstrated an uneasiness among Americans more comfortable with the cultures of Europe than the rising nations of Asia.

“When we were worried about foreigners buying up America in the 1980s and early 1990s, that really was fear of the Japanese,” said Robert Litan, director of economic studies at the Brookings Institution think tank in Washington and co-author of the recent book “Globaphobia.”

“We’re on top of the world right now. Our economy is the strongest it’s been in a generation, so there’s a lot less fear of foreigners,” Litan said.

Buoyed by America’s economic dynamism and a stock market that keeps defying the laws of gravity, U.S. multinationals are well positioned to take advantage of the emerging markets.

That is particularly true now that Asia’s economic tigers are licking their wounds--crippled by a devastating round of currency and stock market crashes--and European leaders are distracted by their effort to introduce a common currency, the euro, to bind themselves into an even closer monetary union.

Rosabeth Moss Kanter, a Harvard Business School professor and expert on globalization, noted that American management techniques are being adopted widely, U.S. universities are training executives from around the world and English is the language of international commerce.

Last week, a group of USC professors became the first Americans to lecture at a leadership school run by the Chinese Communist Party’s Central Committee. Their topics: Western economics and privatization.

“Our influence is very great. And in some industries going global fast, like telecommunications, our industries dominate in powerful and dramatic ways,” Kanter said.

This is no time for Americans to be overconfident, however, because many European and Asian companies are hard at work developing strongholds far from home. Swiss-based Nestle, a $60-billion food company, dwarfs its competitors in Asia. And Germany’s Volkswagen holds a commanding 52% share of the fast-growing China market with its Santana sedan.

Mattel Seeks to Expand Globally

Companies such as Mattel Inc. are scrambling to readjust. In 1996, the giant toy-maker began an aggressive review of its global operations and hired the Boston Consulting Group to come up with a program to help the company compete outside its home turf.

Sixty-five percent of Mattel’s revenue comes from the United States, home of just 3% of the world’s children. Within five years, Mattel Chief Executive Officer Jill Barad wants the company to do at least half of its business outside the U.S.

A look at Barbie, the firm’s hottest commodity, gives an idea of why firms are furiously going after foreign consumers. In the United States, the company sells four dolls per child, a number that drops to two in Europe and one in Japan. Mattel thinks it can sellan additional $2 billion worth of Barbies.

Numbers tell part of the global story: Exports and imports together accounted for 25% of U.S. gross domestic product in 1997, up from 9% in 1960. By 2000, more than 16 million U.S. jobs are expected to be tied to exports alone.

But equally dramatic, and far less visible, is the degree of foreign investment in the U.S. economy, from Middle East investment in Beverly Hills real estate to Chinese purchases of U.S. Treasury bonds to foreign acquisitions of U.S. household names such as Firestone tires and American President Lines.

Foreign Goods Commonplace in U.S.

For American consumers, goods made by companies headquartered overseas are so commonplace that they no longer seem foreign. When Kanter conducted focus group surveys with ordinary Americans around the country for her 1995 book, “World Class,” she asked them what they considered the nation’s best products.

Among the answers she received: Sony Walkman (Japan), Wilson tennis balls (Finland) and Michelin tires (France).

As these trends accelerate, the U.S. government increasingly finds itself caught between those who benefit from globalization and those who believe it accelerates the loss of high-paying jobs and erodes America’s economic sovereignty. Likewise, many individual Americans remain ambivalent.

“People are very comfortable buying foreign products in a way that wasn’t true a generation ago. But I don’t think the public is reconciled to the idea of companies that have no national identity or loyalties,” said Guy Molyneux, a pollster with Peter D. Hart Research Associates.

The Clinton administration was reminded of the nation’s conflicted interests two years ago when it threatened to impose a high tax on imported Japanese luxury cars after talks over U.S. access to the Japanese auto market broke down.

The U.S. government backed off after a firestorm of protests from some of the 402,000 Americans whose jobs are directly tied to the Japanese automobile industry, including Honda workers in Ohio and Nissan dealers in Long Beach.

Fears remain about the threat globalism poses to issues important to Americans, such as environmental and food safety and worker rights. Labor activists and environmentalists unhappy over the North American Free Trade Agreement mounted a successful campaign last year to defeat President Clinton’s bid to get fast-track negotiating authority from Congress to simplify trade agreements.

Labor officials say low-wage foreign competition has robbed this country of high-paying jobs while holding down the paychecks of other workers.

Globalization Trend Called Neutral

Still, the joint ventures, direct investments and mergers that all are part of globalization are neither good nor bad by themselves, said Ron Blackwell, director of corporate affairs for the national AFL-CIO.

Blackwell said that if global businesses “meet their competition with quality products and customer service and continuing innovation, and meet the cost competition with increased productivity . . . it can be good for everybody.”

But Lori Wallach, a trade specialist for Public Citizen, Ralph Nader’s consumer watchdog group, called the rush to globalization a recipe for disaster in which the “breaking down of borders and laws” results in a “race to the bottom for wages.”

Even aside from these broad public policy concerns, corporate executives find their jobs complicated by the challenges of conducting business overseas. General Motors made a legendary slip-up when it tried to sell its Chevrolet Nova in Latin America without changing the car’s name for Spanish-speaking consumers. (In Spanish, “no va” means “doesn’t go.”).

In response, many successful multinationals have decentralized control of their companies so that on-site or nearby managers can respond to localized consumer tastes and regional operational issues. Still, decentralization can mean frustration too. The late Coca-Cola Chairman Roberto C. Goizueta, a master of global business, once was reduced to pleading with bottlers and distributors at a company conference in Mexico to “please paint your trucks red.”

Yet executives such as Chuck Miller, chairman of Pasadena-based Avery Dennison Corp., remain enthusiastic about globalization. Five years ago, his firm, which has 80 office supply and labeling operations in 38 countries, launched an aggressive program to ride the coattails of its top customers overseas.

It’s been an exciting and profitable ride. Procter & Gamble recently announced it will use Avery for labels on all its products throughout Europe. Boston-based Gillette Co., the world’s leading razor company, is distributing throughout South America a line of specialized Duracell batteries carrying Avery labels.

Avery recently built a factory in Europe to produce labels for Duracell batteries and is now considering building a new manufacturing facility in China. In just three years, the Duracell label line has mushroomed into an $80-million business.

“Wal-Mart, Staples, Office Depot, these companies are thinking and acting globally,” Miller said. “When Wal-Mart moves to Mexico to open 50 new stores, we are right with them.”

Thomas S. Mulligan in New York contributed to this story.