How can Mexico compete in the global economy?
—Adolfo Navarro, Monterrey, Mexico
Your question says Mexico, but put virtually any developing nation from Turkey to Brazil in its place and our answer would be the same. First, we’d state what you probably already know: Countries whose businesses are trying to establish a foothold in foreign markets need an educated workforce, affordable sources of energy and supportive trade policies.
But we would add another factor that is, in our view, equally important. The businesses that will compete most effectively in the increasingly fierce global economy will be those that have benefited from intense competition right at home.
Think of it this way: No speed skater or pole-vaulter heads to the Olympics before years of intense competition with the best and brightest in his own backyard. The same goes for firms heading into the business “world games”. First, they need to train and condition themselves—among themselves.
Make sense? Sure. But, it still doesn’t happen enough. Your own country is a good example. Its economy became “free” in 1994 when the government essentially stopped allowing—maybe “anointing” is a more accurate word—companies to control entire industrial sectors.
But nearly 15 years have passed, and several conglomerates still dominate the national economy, meaning too few entrepreneurial ventures have been able to emerge or deliver the kind of critical lessons about speed, innovation and agility that only they can.
There are exceptions: Cemex SAB de CV, the cement producer, and Grupo Bimbo SAB de CV, the food manufacturer, among others, are companies that have grown domestically and now manage to thrive in foreign markets. But Mexico remains a country with too little local competition, which has taken, and will continue to take, a toll on those “unconditioned” Mexican companies attempting to enter the global ring.
By contrast, both Japan and South Korea prepared their companies to enter the world economy swinging. In the 1970s, the Japanese government encouraged its “zaibatsu” to reform and compete aggressively locally before setting their sights on foreign foes, with the implications most notably felt by the US. And, what an “ouch” it was, especially for the consumer electronics, automotive and steel industries.
A decade later, Korea unleashed its “chaebols” with similar results, as companies such as Daewoo and Samsung Electronics entered the global markets with levels of efficiency and productivity that quickly established them as formidable competitors.
China, interestingly, still has a largely state-controlled economy, and yet, its entrepreneurs have long been irrepressible. When General Electric Co. bought a light bulb factory in Shanghai in the 1990s, for instance, Siemens AG and Philips Electronics NV were the main concern. Within a year or two, however, scores of Chinese start-ups had purchased bulb-manufacturing equipment from eastern Europe, launching a competitive slugfest. No wonder so many Chinese companies enter the global market armed for bear. They have been practising.
So, what is Mexico to do? If we’re right about local competition being a vital prerequisite for global success, obviously the government needs to encourage it—or at a minimum, let it happen.
That seems to be what’s happening in India these days. Its economy began liberalization efforts in the 1990s, but since 2000, they seem to be accelerating, with an increasing number of companies breaking into industries once controlled by a few family conglomerates. New technologies have helped. With the emergence of telecom, and specifically cellphones, a young company with an exciting business model—Bharti Airtel Ltd—has been able to compete fiercely with market mainstays Tata Communications Ltd and Reliance Communications Ltd. For all three firms, the innovations sparked by competition have driven growth and profitability—giving each the ability and confidence to expand overseas.
The power of local competition is not, incidentally, just relevant to developing nations. If only! In the US, established companies in the semiconductor and biotechnology industries are constantly being pushed to new heights by feisty upstarts coming at them. But it happens even in mature businesses.
A case in point is the business news channel CNBC. Without any real competition for a few years, it was doing just fine when Rupert Murdoch announced that Fox, a tough competitor if there ever was one, was launching its own business channel. Seemingly overnight, CNBC looked like a new place, with re-energized anchors, bold new programming and a revamped website. Fox won’t stop coming at CNBC, of course, but you can be sure both organizations will be better for the fight.
Day-to-day, no normal person wants competition. It makes everything harder. But competition has an incontrovertible way of creating excellence and verve—in a word, edge. And, you don’t want to leave home without that.
©2008/By NYT Syndicate
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