|
US Companies That Make Leap Overseas Reap Results |
|
|
|
News
|
A Remedy Against Slumping US Dollar, Risks at Home
By Matthias Leitzmann, 1/27/08
For decades US business schools have advocated to think globally. I remember taking my first marketing class in the mid 80’s, and noticing that the lecture was filled with references concerning internationalization, global economies, and overseas marketing opportunities. It seemed exciting and new to think globally and envisioning doing business all over the world.
Later, as I begun working professionally, I noticed that only a handful of US companies, usually the very large ones, were actually expanding overseas and implement what I had heard so empathically advocated during my early academic years. In reality, why would a thriving US business see the need to expand overseas? After all, the US economy has long been the largest in the world, with more well-to-do and paying customers than anywhere else? Why deal with the risks and complexities of an overseas expansion when there are viable markets right here “in front of our own doorsteps”? Also, thinking back, the barriers for entering foreign markets seemed nearly insurmountable – in terms of costs, government regulations, and available resources.
Today, two full decades later, many of these hurdles have disappeared. The unification of Europe, the dismantling of the USSR, and the ongoing transformation of Asia from a largely third-world region to a global business center, coupled with free trade agreements, an ever-increasing pool of English speaking workers worldwide, and last – but not least – the emergence of the Internet, have all contributed to making the world “smaller”. In the process, the global workforce has become more skilled, worldwide wealth has increased, entrepreneurship began to flourish, and consumers as well as businesses started to search globally for solutions that would enhance their lives or provide a competitive edge.
But even more importantly, the key element that was missing then, and is so dominant now, is that there is a real, and one could argue, urgent need to expand overseas. First, with many of the traditional obstacles gone, a business that does not take the initiative to explore foreign markets is going to face competitors that will – who may very well become stronger and more viable in the process. Second, the mounting US government deficit, the sub-prime mortgage crisis, and the fallout from the Iraq war overseas (whether real or perceived), have contributed to a weakening of the US dollar, making getting paid in i.e. Euros a welcomed proposition for US businesses.
A good example of this is the recent earning reports by some of America’s most respected corporations. Despite stellar sales at home, investors’ sentiments have been largely jittery and stock values have suffered. An exception represents Microsoft, whose shares increased more than 5% in after-hours trading Thursday. Despite the fear of a potential recession in the US, Microsoft’s Chief Financial Officer Chris Liddell expects strong growth across the company’s five major businesses in the coming quarters – in part due to its geographical spread, which translates into the company deriving approximately 60% of its revenues from outside of the US (Robert Guth, The Wall Street Journal, January 25, 2008).
With access to more resources, lower barriers of entry, and the opportunity to better combat currency as well as economic fluctuations, the question for today’s US businesses has shifted from “why should we expand overseas” to “can we afford not to”? Like any other business expansion, a move overseas needs to be planned diligently and orchestrated carefully. But, if done correctly and with the right support team in place, overseas expansion may turn out to be an ideal accelerator for growth, or a defender against economic turbulence. Quite possibly, it may be both.
|
|
Subscribe to our FREE Newsletter
The Management
|
