Get Your Head in the Globality Game

The U.S. once underrated Japanese industry's many successes. Today, China and India are gaining market share—but even faster

by Harold L. Sirkin

In 1969 I caught a fever that swept through New York like a pandemic: Mets fever. That was the year the once-hapless New York Mets racked up a 100-win season for the first time and went on to beat the Baltimore Orioles in one of the greatest upsets in World Series history. My parents bought me an inexpensive little transistor radio, a Panasonic (manufactured by a then-unknown company called Matsushita, so I could keep up with the Miracle Mets. During the Series I would even sneak out of school to listen to the games.

Fast-forward a few years to 1972. That was the year my father brought home our first Japanese car—a funny little thing called a Datsun (built by another then-unknown company called Nissan (NSANY)).

For many Europeans and Americans—not to mention Japanese—it's hard to remember when Japanese products were mere curiosities. In the 1960s, "Made in Japan" often meant inexpensive "tchotchkes" or junk to U.S. consumers; by 1990 it meant world-class quality.

Americans born after the mid-1960s probably can't remember life without Japanese cars and electronics. Those born prior to then were probably introduced to Japanese goods in the form of cheap ceramic trinkets, inexpensive toys, transistor radios, or those little cocktail umbrellas at Chinese restaurants.

In the 1960s, most U.S. businesses were in a state of denial about Japan. They looked at Nissan, Honda (HMC), Toyota (TM), Sony (SNE), and Matsushita as cheap imitators and would-be copycats not to be taken seriously. They failed or refused to recognize a world that was changing around them. Many didn't recognize Japan's growing capabilities and success, let alone anticipate Japanese industry's many later successes. They are still paying the price for this nonchalance.

Never Underestimate

While much has changed in the intervening years, mindsets haven't. Many top and middle managers today view China and India the way the 1960s generation viewed Japan: They see them as backward countries whose companies do low-cost "subcontracting" for U.S. and other Western companies, and as manufacturers of low-end goods we no longer can produce profitably ourselves.

We continue to underestimate that companies from China, India, and other developing markets have the capability to challenge us, giving these companies time to sharpen their skills, enhance their marketing capabilities, become serious innovators, gobble up Western knowhow and companies, and set their sights on global markets, including the lucrative U.S. market.

But things are different this time. The Japanese invasion was the coming of age of a relative handful of little-known "challenger" companies from a single, low-cost country with a postwar population that, according to the World Bank, didn't reach 100 million until 1967.

Like the Japanese challengers U.S. companies faced in the 1960s and 1970s, the next wave of competitors is hungry, low-cost, and ingenious. But this wave will be much bigger, more like a tsunami, with more than 3.5 billion people and hundreds (and eventually thousands) of challenger companies. These companies will have easier access to the U.S. and the world than the Japanese had in the 1960s, thanks to transportation advances, the Internet and information technology revolution, liberalized trade policies, and the ability to outsource globally to obtain what they need to achieve competitive advantage. Most of the new challengers also are fluent in the lingua franca of the world: English.