Hands-Off: The Losing Trade Strategy
The semiconductor industry has joined the textile industry in the race to see who bleats the loudest about protection. Yet the Semiconductor Industry Association (SIA) refuses to open a Tokyo office, offering the lame excuse that it is better off complaining to the U.S. government and letting the bureaucrats handle negotiations.
We are surely our own worst enemies. The Wall Street Journal recently reported that “most U.S. companies don’t even try to influence Japanese policy,” and quoted a Hewlett-Packard executive who said U.S. firms “are inclined to leave things to Japanese contact rather than get into the process themselves.”
Not all companies in all industries stick their heads in the sand. IBM not only has had a subsidiary in Japan since 1937, but it also belongs to every imaginable government, industry and advisory group and consults daily with the Japanese government. The computer industry’s primary trade group, the American Electronic Association, has opened a Tokyo office headed by a U.S. citizen who is fluent in Japanese. And Motorola’s more recent success can be attributed to a similar strategy of wholesale participation.
To be sure, the Japanese are tough trading partners determined to maximize exports. And they don’t always play fair. The semiconductor industry has just received a major favorable ruling in a dumping case. Japan was clearly selling to the U.S. market below cost.
But the real problem stems from the historic adversarial business-government relationship in the U.S. Though we have over 10,000 trade associations, they only tend to become energized over narrow special interests, such as the current frenzy of self interest surrounding the tax act revision. American businessmen as a whole don’t like politics or politicians, while European and Asian businessmen see politics as a natural extension of business and a major part of their ongoing existence.
Economist Robert Reich neatly divides the last hundred years into periods of shifting power between business and government. For instance, for the last several years business has enjoyed a generally more favorable power base and public image than those of government; the reverse was true in the sixties. Over time some sort of balance is achieved. But it certainly is not the result of a continuing business-government partnership, such as that found in Japan or Germany.
In fact, American corporations historically have assigned the company’s government relations job to a lightweight or sidetrack executive or a defeated politician. Trade associations usually hire as directors former politicians or former Capitol Hill staffers. The point is, prominent American business leaders keep their hands clean of the whole political process, except for the carefully arranged, ritualistic, twenty-third-hour foray to congressional offices or Capitol Hill hearing rooms. Day-to-day interchange among American senior executives and senior appointed or elected officials is rare indeed.
Perhaps Reg Jones, former chairman of General Electric, was an exception; he was hailed by many as the forerunner of a new breed of Washington-focused executives of giant concerns. Nonetheless, many breathed a huge sigh of relief when he appointed as successor Jack Welch, who has subsequently avoided Washington as assiduously as Jones approached it. So much for trends.
Our hands-off venue pervades our approach to appointments, organization structure, and selling techniques. It leaves us uniquely unfit for membership in the truly global marketplace that is the prime fact of life for future business dealings in manufacturing and financial services industries. The head-in-the-sand approach of the SIA is much more characteristic than is the recipe of IBM, Motorola or the American Electronics Association.
We must encourage our government to pursue fairness with our trading partners. I applaud the recent victories of the semiconductor makers in their wholly correct use of anti-dumping procedures. But the more important, longer-term issue is learning how to participate in the world as it is.
William Jones, vice president of Boeing Vertol (that firm’s helicopter arm) is a retired Air Force General whose career was spent primarily in intelligence. He is an ideal teacher of the new international way. For instance, he makes it his business to question his subordinates before they undertake the most basic business development call. Says Jones, “Sixty hours or so of preparation for a 15-minute meeting with a mid-level government official” is routine. He demands that his people become versed totally in the personal and organizational history of business contacts and how it fits into the long-term decision-making process for a specific sale and for Boeing’s worldwide strategy.
Boeing’s success overseas is matched only by that of IBM. Both firms sell fine products, to be sure. More important, firms have a unique record of leveraging, over decades, patient understanding of the relationships among all aspects of the foreign societies in which they do business.
Only this strategy, over the long haul, will ensure U.S. success in the emerging marketplace. The vagaries of policy—such as monetary manipulation or fair trade activity—will pale by comparison. At any rate, they are not to be depended upon as a basis for enhancing long-term prosperity.
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