As a business strategy, innovation trumps globalization
By Sidney Hill, Jr., executive editor -- Manufacturing Business Technology, 6/1/2005 12:00:00 AM
If you watch Lou Dobbs Tonight, the business news show on CNN, on any given evening, you might get the impression that globalization is a sure sign that the Apocalypse is upon us.
Unlike the distinguished Mr. Dobbs, who has written a book titled Exporting America, Why Corporate Greed is Shipping American Jobs Overseas, I don't see globalization as the end of the U.S. economy as we have known it for more than 200 years. Globalization is causing companies, and manufacturers in particular, to change business models. And yes, these changes mean hardship for some, but they also present major opportunities for others.
I realize most American workers have to depend on their corporate leaders to identify the opportunities that globalization presents. They also have to trust those leaders to exploit those opportunities to their employees' advantage. That can be a scary proposition following the Enron-WorldCom era. Hopefully, safeguards like the Sarbanes-Oxley Act will prevent that part of history from repeating itself.
In the meantime, we also must hope that our corporate leaders follow the example of companies that have figured out how to make globalization work in their favor. Toyota is a prime example. This Japan-based company currently is setting the pace for profitability in the auto industry. And its U.S. operation, Toyota Motor Sales (TMS) U.S.A., reported its best sales month ever this past April, moving 210,466 vehicles, according to the company's Web site.
Toyota first gained a foothold in the U.S. market by introducing small, fuel-efficient cars during our first energy crisis in the 1970s, and it solidified that position over the years by using its acclaimed Toyota Production System (the precursor to lean manufacturing) to consistently deliver high-quality vehicles.
Toyota also has quieted most of the early backlash about "foreign" cars invading the U.S market by building plants in this country. In fact, most of the 210,466 vehicles TMS sold in April were assembled in Michigan, Kentucky, and California. A number of U.S.-based companies also supply parts to those plants.
The lesson for U.S.-based companies contemplating their own global strategies is simple: offer quality products and try as much as possible to act like a local business.
Of course, it's not as easy for outsiders to set up local operations in some countries as it is in the U.S. It is getting easier in most countries, however, and by taking the time to learn local culture, customs, and regulations, those hurdles can be overcome.
There also are some things that don't change, regardless of geography. One is that if you offer a product that customers want or need, they will buy it, regardless of where your company is based.
It's not just coincidence that as the price of gas has once again become an issue for U.S. consumers, Toyota's hottest-selling models are its gas-electric hybrid Prius compact and the recently introduced Lexus RX400h, a gas-electric hybrid sport utility vehicle. These vehicles were not engineered and manufactured overnight.
As Jim Press, the COO of TMS, recently told The Wall Street Journal, during the 1990s, "We invested in hybrids and another company [meaning GM] bought a humungous SUV company." He also could have said innovation is a sound business strategy in any country.
