Are You Really Buying American?


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Are You Really Buying American?

  1. 1. International/Global Business Dr. J. F. García III INTERDEPENDENCY AND GLOBALIZATION. Are you really buying American? © A fundamental shift in the twenty first century is occurring in national economies in which self contained entities and basically isolated from each other by barriers to trade and investment, by distance, time zones, language, by national differences in government regulations and laws, culture, and business organizations, and systems are becoming more and more integrated into a global economy. Cross border trade and investment barriers have tumbled, distances are shrinking due to advances in transportation and communications technology exposing people everywhere to same message, marketing, and products and services. Material culture is starting to look similar worldwide, preferences and tastes are becoming more homogeneous, and therefore, companies can offer standardized, low price and high quality products while incurring economies of scale. International organizations are creating more uniformity and national economies are merging into an interdependent, convenient, and more profitable and efficient global economic system. You might drive to work in a car designed in Germany or Japan which was assembled in Mexico, South Africa or Brazil by Daimler-Chrysler or Toyota from components made in United States, Japan, Argentina, and Bulgaria from Korean or Polish steel and Malaysian rubber. You may have filled the car at a service station managed by a Turkish and owned by a British MNE that changed its name from British Petroleum to BP to hide its national origin. The petroleum may have been pumped from a well of the cost of Africa by a French oil company that transported to the United States in a ship owned by a Greek shipping line. You may have to shave with an electric razor made in China with parts from Taiwan and Indonesia, wear a suit made in Shri Lanka, Italy, Honduras, and The Dominican Republic, shoes from Italy, and a silk tie made in France of silk from China or Mongolia. You have cereal with a banana from Honduras, Ecuador or Costa Rica, drink a cup of coffee from Colombia or Kenya, and have a Kiwi berry from New Zeeland or Australia. While driving to work, you may have your stoke broker in New York or London, on a Nokia cell phone that was designed in Finland and assembled in Texas using chip sets produced in Canada and Taiwan that were designed by Indian engineers working for a firm in San Diego called Qualcom. You may tell the stock broker to purchase shares in Deutsche Telecom, a German telecommunications company transformed from a former state owned enterprise to a global multinational by an energetic Israeli CEO. You may turn on your CD player in your car which was made in Thailand by a South Korean or Japanese firm, to hear a popular hip hop song composed by a Swede and sing by a group of Danes in English who signed a record contract with a French music company to promote their CD in Europe and the North America. 1
  2. 2. In the way to work you may pull in a drive-through coffee shope run by a Vietnamese immigrant and order a “single non fat latte” and a chocolate covered biscotti. The chocolate came from the Ivory Coast and coffee from Brazil but most probably, if you want the best, from Costa Rica. while the biscotti was made in Chicago using an old Italian recipe and the sugar came from Peru. While you sip you latte, you hear about civil unrest in Africa, protesters killed in Geneva, Switzerland and Genoa, Italy on antiglobalization protest, turmoil in the Middle East, war in Iraq, and a story about how the economic slowdown and natural disasters in the United States has sent the Japan’s Nikkei stock market index to a sixteen year low. This is the world we live in where the volume of good, services, resources, and investments of all kinds and types crossing national borders have expanded faster than world output every year for the past two decades. Are You Really Buying American? Consider the following scenario of a “typical” American family: The Boltons, Mike and Barbara, live in New York City. Mike is a security consultant with the security services firm Wackenhut Corporation. Barbara is an advertising executive in the Global Head Office of J. Walter Thompson. On her way home from work, Barbara listens to the new Dixie Chicks CD in her Chrysler van. She stops by the mall to pick up some hosiery at the Casual Comer clothing store, gets a tankful of gas at the Shell station, and then drives over to the grocery store. She fills her shopping cart with a variety of items, including Ortega taco shells and salsa, Hellmann's mayonnaise, Real Lemon lemon juice, Ragu spaghetti sauce, Carnation Instant Breakfast drink, Taster's Choice coffee, CoffeeMate nondairy coffee creamer, Lipton tea, Mott's apple sauce, a half-dozen cans of Kern's Nectar, frozen Bird's Eye vegetables, a few containers of Dannon yogurt, some Evian water, and several packages of Stouffer’s Cuisine frozen dinners. For a treat, she picks up a pint of Ben and Jerry's ice cream and a Baby Ruth candy bar for Mike. She also grabs several cans of Alpo for their dog, and a box of Friskies and a bag of Tidy Cat cat litter for their cat. She selects a Philip Roth novel and a copy of Elle magazine, then goes down the toiletries aisle for a bar of Dove soap, some Jergen's moisturizing lotion, and a tube of Close-Up toothpaste. Before finishing, she calls Mike on her cellular phone from T-Mobile to see if there's anything else he needs. He asks her to pick up some PowerBars for him to take to the gym during his lunchtime workouts next week. On her way home, she stops at the bookstore and picks up a book-The Da Vinci Code. After finishing up at work, Mike gets into his Jeep Cherokee and puts the new Dave Matthews Band CD into the car stereo. He stops at the Amoco station to fill his gas tank and checks the air pressure in his Firestone tires. He makes a quick stop at Computerland to pick up the newest release of WordPerfect, signing the credit card slip with his Bic pen. Then he goes to the video store to pick up the Spiderman II DVD, before heading to the package store for a bottle of Wild Turkey Bourbon and one of Absolute Vokka. He walks next door to the sporting goods store to pick up some Wilson racquetballs for his workouts next week, and then heads home. 2
  3. 3. Barbara's favorite TV show, Jeopardy, is just ending as Mike comes in the door. While she prepares dinner, Mike opens up a Rolling Rock beer and changes the Dish TV satellite channel on their Magnavox television so that he can catch the end of the baseball game between the New York Yankees and the Seattle Mariners which the Cleveland Indians have defeated several times. Between innings, he skims through the most recent issue of Road and Track magazine. Soon, Barbara has dinner ready and they sit down for their meal, while watching a show on the National Geographic Channel. While this may sound like a very typical evening for many Americans, foreign-owned firms produced nearly every item that the Botons purchased or consumed: Wackenhut is owned by a group 4 Falk of Denmark. • J. Welter Thompson is owned by the WPP Group of the U. • Germanys DaimlerChrysler manufactures Chryslers and Jeeps • Britain's BP owns Amoco, and the British-Dutch company. Royal Dutch Shell owns Shell. • Retail Brand Alliance, an Italian conglomerate, owns the Casual Corner clothing chain. Japan's Kao owns Jergen's. • Nestlé of Switzerland produces Alpo, Baby Ruth, Carnation Instant Breakfast, CoffeeMate, Friskies, Kern's, Ortega, PowerBar, Stouffer's Lean Cuisine, Tidy Cat, and Tasters Choice. • Unilever, a Dutch-based company, makes Dove bars, Hellmann's, Ragu, Lipton, Bird's Eye, Ben & Jerry's, and Close-Up. • Cadbury Schweppes of the U.K. owns Mott's and Real Lemon. • Groupe Danone of France produces Evian water and Dannon yogurt • Columbia Pictures, owned by Sony of Japan, released Spiderman 11, and Sony Pictures Television distributes JeopardylThe Dixie Chicks CDs are produced by Sony's Columbia Records division. • Bertelsmann AG of Germany owns Random House, Doubleday (which published The Da Vinci Code), and RCA Records (which releases Dave Matthews Band CDs). • France's Lagardere SCA publishes Road and Track and Elle. • T-Mobile is owned by Deutsche Telecom of Germany. • Amer Group of Finland owns Wilson Sporting Goods. • Corel Corporation of Canada owns WordPerfect • Computerland is owned by Synnex Information Technologies, Inc., which is 77 percent owned by MiTac International Corporation of Taiwan. • Bic of France produces Bic pens. News Corporation of Australia owns DirectTV and the National Geographic Channel. • Pernod Ricard of France produces Wild Turkey bourbon. • Absolute Vodka is owned by a Scandinavian Multinational. • Magnavox is owned by Philips of the Netherlands. • Interbrew of Belgium owns Rolling Rock. • The majority owner of the Seattle Mariners is Nintendo Corporation of Japan. • The Cleveland Indians is a public corporation with shares of stock located worldwide. This simple example reflects the impact of extensive foreign investments in the United States, especially in recent years. Even some of the best-known "American" products and brands are 3
  4. 4. now produced by foreign firms. "Why invest in the U.S.A.? It's simple. It's a great economy, and it produces great returns. Beyond that, the U.S. is so competitive that we know the things we learn operating there will help us in all of our other markets around the world," said Sir Ian Prosser, former chairman of the U.K.-based Six Continents hotel group. Investments have also flowed outward from the United States. American companies such as Coca-Cola, Starbucks, McDonald's, the Gap, Microsoft, and Levi's are found in Japan and nearly every European nation. American companies have also purchased a range of foreign companies and brands. Ford Motor Company owns the Jaguar, Land Rover, Aston Martin, and Volvo automobile brands; General Motors has purchased all or part of such companies as Hyundai, Suzuki, Fiat, Isuzu, Vauxhall, and Saab. There has been almost no negative backlash among Americans to the flood of foreign investment into their country. Perhaps Americans realize that the buying and selling of companies around the world is just part of globalization, or perhaps Americans just do not realize how much their daily lives are impacted by foreign-owned companies. In fact, the livelihood of many Americans may depend on foreign investment, and approximately one in six U.S. jobs is tied with interna- tional trade and investment. Sources: From T R. Reid, "Buying American? Maybe Not; Many U.S. Brands European-Owned," The Washington Post, May 18, 2004; Nicholas Platt, "Make Global Skills a Top Priority," Financial Times, July 2, 2004,p. 13; "Casual Corner Group," press.tem (July 5, 2004);"Key Brands," (July 5,2004);"All Products," pagename=Core12/ Products/AllProducts (July 5, 2004);"Amer Group PLC," http://premium. (July 5, 2004); "Our Brands," (July 5, 2004);"Unilever brands," (f uly 5,2004); "Business Fields," http://www.l< e/profile/jigyou/index. html (July 5, 2004); "Corporate: Our Brands," nter us/corporate/brand conte.asp (July 5, 2004); "Diageo Careers 'age: Our Brands," (July 5, 2004); "Danone: Brands and Products," >rands/index brands.html (July 5, 2004); "About Lagardere: Magazines," ittp:// Magazines.shtml (July 5, 2004); `Our Company," July 5, 2004); "Welcome to the World of Sony," July 5, 2004); "News Corporation," ndex2.html (July 5, 2004);"Bertelsmann Media Worldwide," http://www. (July 5,2004); and "Com,any Information," (July 5, 2004). 4