The unprecedented and precipitous growth of the US economy in the late 1990s has slowed dramatically in the last few years. Growth in most of the rest of the world has followed suit the exception of China. The Organization for Economic Cooperation and Development (OECD) estimates that the economies of member countries will expand an average of 3 percent annually for the next 25 years, the same rate as in the past 25 years. Conversely, the economies of the developing world will grow at faster rates from an annual rate of 4 percent in the past quarter century to a rate of 6 percent for the next 25 years. Their share of world output will rise from about one sixth to nearly one third over the same period. The World Bank estimates that five countries – Brazil, China, India, Indonesia, and Russia whose share of world trade is barely a third of that of the European Union will by 2020 be 50 percent higher than that of the European Union. As a consequence, economic power and influence will move away from industrialized countries – Japan, the United States, and the European Union to countries in Latin America, Eastern Europe, Asia, and Africa.
This does not mean that markets in Europe, Japan and the United States will cease to be important; those economies will continue to produce large, lucrative markets and the companies established in those markets will benefit. It does mean if a company is to be a major player in the 21st century, now is the time to begin laying the groundwork. How will these changes that are taking place in the global marketplace impact international business? For one thing, the level and intensity of competition will change as companies focus on gaining entry into or maintaining their position in emerging markets, regional trade areas, and the established markets in Europe, Japan, and the United States.
Companies are looking for ways to become more efficient, improve productivity, and expand their global reach while maintaining an ability to respond quickly to deliver a product that the market demands. For example, large multinational companies such as Matsushita of Japan continue to expand their global reach. Nestle is consolidating its dominance in global consumer markets by acquiring and vigorously marketing local country major brands. Samsung of South Korea has invested $500 million in Mexico to secure access to markets in the North American Free Trade Area. Whirlpool, the US appliance manufacturer which secured first place in the global appliance business by acquiring the European division of the appliance maker N V Philips immediately began restructuring itself into its version of a global company. These are a few examples of changes that are sweeping multinational companies as they gear up for the 21st century.
Global companies are not the only ones aggressively seeking new market opportunities. Smaller companies are using novel approaches to marketing and seeking ways to apply their technological expertise to exporting goods and services not previously sold abroad. A small mid western company that manufacturers and freezes bagel dough for supermarkets to bake and sell as their own saw opportunities abroad and began to export to Japan. International sales, though small initially, showed such potential that the company sold its US business in order to concentrate on international operations. Other examples of smaller companies include Nochar Inc., which makes a fire retardant it development a decade ago for the Indianapolis 500. The company now gets 32 percent of its sales overseas, in 29 countries. The owner of Buztronics Inc., a maker of promotional lapel buttons heard from a friend that his buttons with their red blinking lights would do great in Japan. He made his first entry in exporting to Japan and after only a year, 10 percent of Buztronics sales come from overseas. While 50 of the largest exporters account for 30 percent of US merchandise exports, the rest come from middle and small firms like those just mentioned. The business world is weathering a flurry of activity as companies large and small adjust to the internationalization of the marketplace at home and abroad.
As is always true in business, the best laid plans can fail or he slowed by dramatic changes in the economy. When the US economy was less involve in international trade, economic upheavals abroad often went unnoticed except by the very largest companies. But in 1997, when the stock market in Hong Kong dropped precipitously and South Korea and Several Southeast Asia economies faltered shortly, the US stock market reacted with its largest daily drop in several years. The fear was the potential negative impact on US technology industries if the economies of Asian customers slowed. Four years later most of the world’s emerging markets were on a somewhat slower but nevertheless positive growth path than before the financial crisis of 1997.