Where The Twain Meet
September 1 1988 by Robert W. Lear
As far as most CEOs are concerned, there has been no such thing as a purely domestic decision made for several years. Global thinking has become a standard ingredient of the modern management process. Before his company brings out a new product, adjusts a price structure or makes a major capital expenditure, a thinking CEO must reckon, not only with the combative reactions of his American competitors, but he must also plan his international program and gauge its impact on a host of foreign companies-many of whom have difficult-to-pronounce names and unfamiliar policies.
Many of these CEOs have become internationally conversant. They are accustomed to dealing with the European Economic Community players; the big, international corporations of Europe are getting to be “known” quantities just as much as their American counterparts. In similar fashion, the major Japanese companies, while formidable competitors, have become somewhat predictable because of their style and culture.
So what’s new and different for the global-thinking CEO these days? In two words: Pacific Basin; the entire area from Jakarta and north through Japan. I have just returned from two long Pacific trips and have been greatly impressed with what I have seen and heard of the present and future competitiveness of the whole area. For what it’s worth, here are a few observations.
The Japanese continue to be ferocious competitors. Despite higher labor costs and dollar exchange problems, they have shown much ingenuity and diligence in holding onto their market share positions with minimal profit reduction.
The amazing Koreans are greatly improving their quality, management techniques and marketing skills. I observed dramatic differences compared with what I witnessed in Korea three years ago.
The other Newly Industrialized Countries (NICs), particularly Taiwan and Hong Kong, are tough and getting tougher as they upgrade from straight, lower labor cost pools to more sophisticated lines. Meanwhile, new low-wage areas, such as Malaysia, Indonesia and the Philippines, emerge like mushrooms.
Throughout it all, the immense and nearing shadow of China, both as a potential market and competitor, captures everyone’s imagination. The Japanese and Koreans seem to be especially far along in working out deals with the Chinese.
The Australians and New Zealanders, both faced with militant unions and inflation, are deeply concerned with their ability to compete. In truth, the whole Pacific Basin seems to be sloshing over with hardworking, well-educated, emotionally driven people who believe they are just beginning to get their industrial acts together. They are quickly losing their awe of American power, glory and money as they develop their own prowess. They are sending their young managers to the United States to work in our banks and offices, where they learn everything they can from us-including our language and our customs. They are enrolling their young people in our universities and graduate schools, where they do extremely well. At Columbia Business School, nearly 20 percent of our MBA candidates are foreign nationals, and the largest contingent is from the Pacific Basin.
No doubt about it, the Oriental educational, cultural and family programs are producing winners. (We even see it in the second- and third-generation children of Pacific Basin parents, who win an inordinate share of the scholarship awards at our high schools and universities.) In the face of this broad challenge, the question becomes, “What does the American CEO do about it?” A logical answer might be, “Roll up your sleeves and go to work;” but that answer is much too short and vague. Here are a few things you might contemplate doing if you haven’t already done so:
· Review all of your corporate numbers and see where the Pacific Basin fits into your present and potential market share positions;
· assess your Pacific Basin competitors with an estimate of their cost, capacity and programs;
· check up on what your competitors are doing in the Pacific Basin in terms of acquisitions, joint ventures, licensing, local offices and the hiring of experienced personnel;
· have someone make an honest and objective appraisal of your present and predictable competitiveness and see what it takes to improve.
In the meantime, take a two- or three-week trip and see for yourself; arrange to visit a few CEOs in Japan, Korea, Hong Kong and Taiwan-your banks can be helpful here and so can the U.S. embassy. Go through some plants; you will be surprised at where they are ahead of and behind you. Talk to some American businessmen stationed in those countries. Ask questions. Take notes. Think through the best possible marketing and management programs that will enable your company most effectively to compete or work in conjunction with these redoubtable people over the next decade.
It will be time well-invested.
Robert W. Lear teaches at Columbia Business School where he is Executive-in-Residence. He is a former CEO of F. & M. Schaefer Corp. (1972-1977) and he holds directorships with Cambrex Corporation Inc.; Church & Dwight Co.; Crane Company; Scudder Capital Growth; Development and International Funds; Korea Fund; and Welsh, Carson, Anderson, Stow Venture Capital Co.; and, he is a member of the National Advisory Board of Chemical Bank. He authored the recently published book How to Turn Your MBA Into a CEO.