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Strategies for Surviving the Globalization Hurricane
Injection Molding Magazine, by Clare Goldsberry
Globalization. It's a word we hear everywhere in business, yet for many, deciding just how global to be is a dilemma. Many molders want to be a part of the worldwide marketplace, but at the same time they fear what the global market may do to domestic manufacturing in the U.S. Molders and moldmakers fear the loss of U.S. manufacturing, their life's blood, as more and more OEM plants pop up in Mexico, Central and South America, and Asia.
| America is good at innovation and will lead the world in developing the assets of the new economy. |
Now globalization is under way that encompasses both industrial and information markets. The industrial revolution in Latin America, Asia, and Eastern Europe is bringing these countries into the process, while the information revolution in advanced Western economies is pushing industry into other countries in a natural redistribution of the global division of labor.
"Why is industry moving to countries like China?" asks Robert McGarvey of Beckett & Beckett Inc.Canada (Edmonton, AB). "Because they have the perfect system to accommodate this industrial revolution. We don't anymore." So how can molders and moldmakers survive the challenges of globalization?
Survival Kit
Too many people running today's manufacturing companies don't know what they do or how to capitalize on what it is they do well. "Has America become noncompetitive?" asks McGarvey. "Well, yes and no. Low-value manufacturing will naturally migrate to countries where there's accommodation for manufacturing. But America is good at innovation and will lead the world in developing the assets of the new economy."
So, what do America's manufacturers need to do to avoid being swallowed up by globalization? First, says McGarvey, they must renew their commitment to excellence by attaining focus and differentiation, and surround themselves with the best people and advice.
Secondly, they must learn to govern the new class of assets. "Management must learn to identify, value, capitalize, and manage intellectual property assets," he says. "Brand isn't goodwill, it's an IP asset. Use it well."
Third, they must prepare for new, tougher business ethics. "Standards are rising, and management will be held to higher ethical standards, so be diligent about business practices," states McGarvey.
Fourth, manufacturers must understand that the new economy is real and concentrate on cooperation and forging collaborative strategies with key supply partners and customers. They must also implement e-business strategies that are right for their situation. "Relationships are key to success. There's a need for a lot more cooperation," he says. "Don't be a supplier on one level of the organization. Be known at all levels to develop a strategic alliance."
McGarvey also reassures molders that "volatility doesn't mean [the economy] is dead, it's just going through massive change."
To take advantage of this information, U.S. manufacturers must create a "knowledge culture" within their organizations. The key to success in the future is rapidly converting knowledge, which is already in the organization, to products and services, and providing value to customers, says McGarvey. "Place customer creation first and shareholder value second. Know that shareholder value will come as the result of new customer creation."
Finally, manufacturers must find new ways to make money. "We're not just going through a theoretical revolution," he adds. "What we make and how we make it and distribute it is key to success."
GLOBAL INVESTING
China presents a peculiar dilemma in that we in the U.S. "think we're bringing China into greater democracy and freedom by taking business and technology over there," explains Robert McGarvey. "However, [Communist party leaders] see the world much differently. They see all this incoming technology and business as a means of increasing their power base."
McGarvey warns companies that invest in plants in China, "You can get your business right, but if you get your politics wrong or your currencies wrong, you're dead."
Other factors that influence globalization include religious fundamentalism, European isolationism, and global currency confusion. Cultural volatility impacts globalization in that not everyone welcomes Western values and ideals.
Property ownership is "very political in nature," but critical to the business community and the globalization process. "Capital is rooted in ownership," notes McGarvey. "But you don't own anything with security unless your interests are represented politically. If the owners of property as a group have no political representation in a region, you have nothing."
McGarvey explains that a widening estate of ownership is driving worldwide growth in capitalism, but cautions that ownership has two aspects: legal ownership, which allows possession of legal title to property, and ultimate ownership, in which the political power sets the rules of ownership, as in China.
Global political volatility gives an edge of uncertainty to decisions to locate plants in countries like China, where on any given day someone in that nation's communist politburo could wake up and decide that foreign investors own nothing, warns McGarvey.
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Robert McGarvey is Founder & Director of Strategic Performance at Beckett Advisors, Inc., a strategic marketing firm based in Los Angeles. He can be reached at robertM@beckettadvisors.com
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