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en. Colin Powell once said, “Don’t be afraid to challenge the pros, even in their own backyard. Learn from the pros, observe them, seek them out as mentors and partners. But remember that even the pros may have leveled out in terms of their learning and skills. Sometimes even the pros can become complacent and lazy.”
Powell’s words reverberate as news of the latest corporate downsizing hits Wall Street. As the American economic slowdown continues into its third quarter, the conventional wisdom of the “experts” says that big companies must get lean and mean in a hurry if they are to compete.
Ron Starner
The experts have been wrong before; they could be wrong again. While economists focus on statistics like declining retail sales and dropping consumer confidence in the United States, they ignore the next growth opportunity.
Despite the recent downturn in the U.S. economy, international companies are investing in the U.S. at a record pace. Consider two key indicators:
- Foreign-owned assets in the U.S. increased by US$275.2 billion in the fourth quarter of 2000, compared with an increase of $195.3 billion in the third quarter. Overall in 2000, foreign-owned assets in the U.S. increased $952.4 billion, compared with an increase of $753.6 billion in 1999.
- Net financial inflows for foreign direct investment (FDI) in the U.S. were $94.4 billion in the fourth quarter, up from $72.7 billion in the third. For the year, net financial inflows for FDI set a record of $316.5 billion in 2000, a 15 percent increase from the previous record of $275.5 billion in 1999.
The U.S. Department of Commerce report from the Bureau of Economic Analysis is available at www.bea.doc.gov/bea/rels.htm, but here’s why you should be interested: Not everyone — particularly not every company in Europe and Japan — allows corporate strategy to be dictated by the fortunes of the NASDAQ or Dow Jones Industrial Average.
In second- and third-tier markets like Raleigh-Durham, N.C.; Hampton Roads, Va.; Charleston, S.C.; and Richmond, Va., international companies are picking up the slack from the U.S. slowdown by launching major plant expansions and committing to large capital investments.
On April 25, Leica Microsystems of Wetzler, Germany, announced that it will locate its world headquarters for its semiconductor division in Fairfax County, Va. Leica, a $540 million company with 12 factories in eight countries, joins Infineon Technologies as German investors establishing semiconductor operations in Virginia.
“The choice of the location in Fairfax County, Va., can be attributed to the dynamic growth of the high-tech industry in this region,” says Leica CEO Horst Wegener. “As the USA is also the place where the largest innovations in the semiconductor industry are made, it was therefore a logical step for us to move the headquarters of our business and accessories for the semiconductor business to the USA.”
Leica isn’t the only European firm expanding beyond its borders. Pergo, a Swedish floor manufacturer, is investing $27 million into an expansion in Raleigh. Other examples include Ceotronics, a German maker of communication systems, which moved its U.S. headquarters to Chesapeake, Va., and Intervet, a subsidiary of Dutch-based pharmaceutical giant Akzo Nobel, which located a $37 million manufacturing and R&D center in Kansas City, Mo.
What do these global players have in common? First, they see the U.S. as the place to be in order to compete in the new economy. Secondly, they reject the conventional wisdom that a slowing American economy is an excuse to retrench.
Is your company missing a growth opportunity? It may if you’re not paying attention to your global intelligence quotient. Site Selection helps you close that gap by providing our annual in-depth report on new plants and expansions in Europe. Find out where multinational companies Siemens AG, Ford Motor Co., IBM Corp., DaimlerChrysler Corp., Ikea AB and Philips Electronics NV are going — and why.
High-growth firms Akzo Nobel NV, Volkswagen AG, General Electric, Sony Corp., Colt Telecom Group and Deutsche Telekom all announced at least eight new corporate facilities throughout Europe in 2000. They found new markets for their products in places like the Czech Republic, Poland and Russia.
In each case, corporate leaders rejected the status quo and instead drove change throughout the company. Instead of listening to the “pros,” they challenged them. Instead of pulling back, they aggressively sought new places to expand.
In the words of Colin Powell, “Experts often possess more data than judgment. Elites can become so inbred that they produce hemophiliacs who bleed to death as soon as they are nicked by the real world.”
Our advice? Don’t be one of them.
