In the global marketplace, a company poised for change is moving way too slowly. Doing business globally is no longer an option; it is essential. Successful companies today have already undergone significant transformation and are maneuvering nimbly between international competitors and sophisticated customers.
“Going global” is no longer an option; it is essential. For today’s - and tomorrow’s - companies to thrive, they must do business around the world.
In international business, executives and managers must have the knowledge, vision and agility to capitalize on rapidly changing markets and technology, to respond to sophisticated customers who demand quality and service at global standards, and to inspire strategic thinking and action in employees who seek stability and may fear change.
(Andrew Banks, left, makes a point as Rosalind Thompson, Curtis Moll, Christopher Connor and Peter Rea pay close attention.)
Four such companies were represented at last fall’s Kamm and Spahr Lecture Series program, “Competing in a Global Society.” It featured:
Andrew Banks, Chairman and CEO of Mid-America, a consulting firm that helps companies such as Boeing, Home Depot and Microsoft utilize e-commerce technology for strategic sourcing, and for managing vendor relationships in order to maximize efficiency and ensure consistent supplier quality and reliability.
Christopher Connor, Chairman and CEO of Sherwin-Williams Co., which manufactures paint, coatings and other products in the countries where they are sold for logistical reasons: Heavy products are costly to transport. Global markets have been part of this company’s growth strategy for decades.
Curtis Moll, Chairman and CEO of MTD Products Inc., which challenged its U.S. workers to participate in developing strategies to produce top-quality, cost-effective products to position the company against offshore competitors with significantly lower labor costs, and still meet the just-in-time needs of large-volume retailers such as Wal-Mart, Home Depot and Sears.
Rosalind Thompson, Executive Vice President / Human Resources of Jo-Ann Stores Inc., which in a relatively short time has developed a viable sourcing strategy that entails sending buyers to countries such as China, India, Sri Lanka, Korea and Japan. There, they seek out goods that appeal to their customers’ sense of value, yet meet the company’s standards for worker safety and well-being.
The presentation was powerful; the Q&A was insightful and informative.
For Sherwin-Williams, whose logo shows its paint covering the globe, international operations are nothing new. “We have a plant in Havana we haven’t set foot in since 1962,” Connor said, due to trade constraints during the Fidel Castro regime. Sherwin-Williams has operations in about 50 countries.
The locally based company makes the black coating for Kodak disposable cameras. Ten years ago, it established a facility near Kodak’s plant in Monterrey, Mexico. Now, Kodak has moved that production to Southeast Asia, and Sherwin-Williams must follow in order to keep that business.
MTD makes lawnmowers, roto-tillers, tractors and other lawn equipment. MTD must get their products in retailers’ hands at competitive prices, when consumers want them. Last August, due to perfect weather, that meant the company had to build 12,500 lawn tractors instead of the 5,000 it had planned.
“When I started in our business, we had some 300 competitors making lawn and garden equipment,” Moll said. “Today, five of us have 80 percent of the world’s capacity in production.” But now, 45 companies in China are switching, with the Chinese government’s encouragement, from the manufacture of motorcycles to production of lawnmower engines. MTD competitors already include Electrolux, based in Sweden, and Murray Ohio, founded in Cleveland but now owned by a Chinese company.
Jo-Ann Stores generates $1.8 billion in revenues selling fabric and crafts; its average sale is about $22 per customer. Its retail outlets are primarily in the U.S., but in the next two years, 60 percent of its sourcing will be overseas for items such as silk flowers, crafts and seasonal goods.
Competing against value-oriented giants such as Wal-Mart, Jo-Ann must offer its customers the goods they want, at the prices they expect, without sacrificing its profit margins - just 2.5 cents on the dollar.
Banks is a B-W alumnus, and Mid-America specializes in technology and e-commerce.
In Boeing’s case, Mid-America helped prune the cost of a C-17 cargo aircraft from $300 million to $200 million through a combination of automation and an on-line qualifying and bidding system for vendors.
Information technology today faces the same challenges that manufacturing has faced for years: As Mid-America develops software and systems, it must compete against international companies where workers are paid substantially less than U.S. workers. Banks said experts predict by 2015, 3.3 million information technology jobs could be exported to Russia, China and India. He said $136 billion in salaries and wages will be lost, yet that accounts for less than three percent of the U.S. Gross Domestic Product.
“We can talk about job loss,” Moll said, “but as consumers, we want the lowest cost.” Thus, U.S. firms must stay competitive against companies in countries where wages are much lower, where environmental and safety regulations are non-existent and where, in one case, a company facing a product liability lawsuit simply went out of business and reopened under a new name to avoid court-ordered damages.
Thompson and Moll said health care coverage - a negligible expense in many countries - costs about $5,000 per worker per year in the U.S. In addition, due to less stringent protection of intellectual property, an overseas competitor might use a pirated version of a sophisticated machine tooling simulation program that would cost a U.S. firm $100,000.
Thompson talked about diversity and cultural respect. She also said that companies need educated workers willing to come to work every day, and noted that in the Cleveland Municipal Schools, nearly two-thirds of students don’t graduate from high school.
Moll sketched an ironic dichotomy, saying while some Americans are undereducated, the young people in his firm are smart, committed and innovative. He expressed optimism with a story about MTD’s Willard, Ohio, plant, where workers vowed to launch a new tooling project faster and better than it could be done overseas - and did.
“Educating people to the challenge and alerting them to what’s going on in the world is paramount for all of us,” he said. “Really, giving people an opportunity to challenge the status quo and to figure out what innovation can do . . . is going to be the key to our survival.”
A question from the floor was, “In a global marketplace, what keeps companies in Northeast Ohio?” The panelists agreed that despite challenges, many companies want to stay where their roots are. Moll praised the region’s workers who “have manufacturing in their blood.” In addition, he said, as a manufacturing center, the Cleveland area can provide his company with motors, bearings, tooling and other needs.
Connor said it is a misconception that all overseas manufacturing facilities are “sweatshops.” While workers generally make lower wages, companies typically provide an on-site infirmary, hot meals for workers and often transportation. Jobs with U.S. companies are sought after, he said.
Panelists agreed that American CEOs bring strong values to their jobs, despite headlines about corporate fraud.
At Sherwin-Williams, “We try to think globally in terms of safety and environment because we live on this planet too, and we have universal respect for human life,” Connor said. “I lay my head on the pillow at night knowing that Sherwin-Williams employees around the globe are treated with respect.”
Listen for Yourself!
You can hear both the October 2003 and February 2004 panel discussions by going to
http://www.bw.edu/webcast/archives.
275 Eastland Rd.