Companies of any size compete on a global market basis. They invest outside their own nation to expand base country product, marketing and management know how into foreign markets where the company’s products or services can be competitive with locally based firms and other foreign firms, including the United States., competing in that national or regional market place.
A key reason that U.S. firms find suppliers outside the country is to remain competitive in all markets. Any firm owes its shareholders and its stakeholders a responsibility to bring a product to each and every market at optimum quality but at the most competitive price. Without that ability the company, no matter how socially or green minded will not last long and all employees, worldwide, will suffer for being part of a losing enterprise.
Companies invest outside their own nation to deter foreign competitors from investing in aggressive marketing efforts in their own back yard. For example, General Electric has invested heavily in Europe to counter attack against both Philips and Siemens whose investments in the United States, in key GE product areas have been and continue to be substantial. Siemens, one of Germany’s largest companies, has over 70,000 employees in the United States and competed head on with both GE and Philips for market share in medical equipment for the entire Western Hemisphere.
Any organization with its situs in the United States is responsible for results first and foremost to the equity shareholders of the U.S. registered firm. Shareholders, all over the world, demand positive results, far too often on a short term basis. Among the largest and most powerful of the shareholders of U.S. corporations are investment funds investing for employee and union managed pension and benefit plans. If the global results of the multinational corporation, based in the United States are not considered adequate the share value drops and the pension and benefit plans suffer earnings power.
Boeing is a prime example of subcontracting assemblies around the world. It is also the single largest exporter of American manufactured products. Caterpillar makes its engine and drive transmissions in the United States, nowhere else. Its mammoth coal mining trucks and diggers are assembled closer to end market. You could say that both companies outsource American jobs but that would be missing the big picture for job creation and job security.
Companies with a global production and sourcing strategy will continue to find parts and components wherever possible to maintain their profitability and competitiveness.
James is executive director of the Center for Global Governance, Reporting and Regulation at Pace University’s Lubin School of Business in New York City with a long career in management consulting in the labor relations area. James is also program director of Pace University’s new Certified Compliance and Regulatory Professional certificate program. He is the author of the first texts in English on labor and industrial law and practice in key countries of Europe. He began his management consulting career with Hewitt Associates in Chicago and McKinsey & Co. in New York City.