This will be the first recession with both variables at play—unprecedented cost pressure on domestic manufacturing and the opportunity to serve developing economies. It requires a new outlook on the part of American business.
NEW YORK (PRWEB) October 29, 2008
Coauthors of GLOBALITY: Competing with Everyone from Everywhere for Everything (Business Plus, Summer 2008) believe that the new era worsens many recession risks—but also presents opportunities for companies that can organize to capture them.
"The downturn is pinching consumers' wallets and reducing business spending: consumers and businesses are trading down. This favors manufacturers in low-cost countries such as China and India and puts extra pressure on U.S. manufacturers. However, there is a mitigating factor—and it's a big one: the chance to benefit by providing equipment and services for the unprecedented infrastructure investment in rapidly developing economies, as well as the opportunity to serve a billion new consumers in those markets," said coauthor Harold L. Sirkin. Mr. Sirkin and his coauthors are partners at The Boston Consulting Group (BCG), a leading global management consultancy.
Added coauthor James W. Hemerling, "This will be the first recession with both variables at play—unprecedented cost pressure on domestic manufacturing and the opportunity to serve developing economies. It requires a new outlook on the part of American business."
Mr. Sirkin and Mr. Hemerling are available to elaborate on their views of the ramifications and implications of a downturn in the era of globality. The following are among the points they can address:
The New Impact of Significant "Trading Down" on the Part of U.S. Businesses and Consumers. Businesses and consumers may rely even more on RDEs, where production costs are 20 to 30 percent lower than in the United States. Unless action is taken now to reduce this difference, U.S. companies and communities that rely on domestic production facilities will struggle, and some may be devastated. Why the U.S. South May Have an Advantage. The U.S. South may be less vulnerable to cost pressures than the North. The right-to-work environment in the South makes facilities there more cost-effective. (Although the U.S. automotive industry in the North is struggling, the U.S. has a thriving, highly competitive auto industry in the South.) China, India, and Other RDEs as Potential Economic Engines for the United States. Infrastructure investment in RDEs—for example, in China's airports and roads—continues to soar, and global-engineering and capital-goods companies can benefit. Furthermore, there are more than a billion first-time consumers rising up in developing countries, giving global consumer-products companies the opportunity to engineer goods for them. Why Global Recession Still Means Big Growth in Developing Economies. According to the International Monetary Fund, overall global growth will be down to 3 percent in 2009, the slowest pace since 2002. That takes into account only 0.5 percent growth in advanced economies—but 6.1 percent growth in emerging economies. What U. S. Government and Business Leaders Can Do to Mitigate the New Risks and Capture the New Opportunities: Ensure that unions and businesses come to terms with new realities in manufacturing and take steps toward "mutually assured survival" rather than "mutually assured destruction." Create tax incentives that encourage savings and the investment of those savings in assets that create value. Have policies that put people to work rebuilding infrastructure—so assets are created that make the country more efficient. It's more than just bridges and roads. It's also energy infrastructure—wind, solar, tidal, and nuclear. Pay close attention to the specific needs of developing economies' new consumers. Look to be part of infrastructure investment and development in RDEs. Be prepared to divest assets to challenger companies based in RDEs—or to acquire them if the circumstances are right. The Commodities Question. Despite sharp drops in the price of oil and talk of a commodities glut, commodities and oil will, over the long run, be scarce because of the inexorable growth of developing economies. Companies need to keep this in mind as they refine their strategies for handling the downturn. To arrange a conversation with Mr. Sirkin or Mr. Hemerling, BCG senior partners and authors of GLOBALITY, please contact Adria Greenberg at Sommerfield Communications, Inc. at email@example.com or 212-255-8386.