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Going Global To Find Growth


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GOING GLOBAL TO FIND GROWTH

One of the incontrovertible facts of life in the new global economy is convergence. Economies everywhere are becoming market-based in form and middle class in lifestyle. Another incontrovertible fact is speed of change. Convergence is happening so fast that the market system, for the first time, embraces practically the entire world. New capitalist countries are racing to catch up, their growth rates surpassing those of the older market economies. As a result, the U.S., Europe, and Japan appear to have lost their leadership roles in sparking economic growth. Asian and Latin American markets are becoming increasingly vital to American, European, and Japanese companies.

Look at the numbers. Corporate leaders are salivating over estimates that fourth-quarter U.S. economic growth may clock in at a 4% rate. That's way above the first half's puny 1.3% rate and significantly higher than the average 2.5% growth rate for the U.S. during the 1980s.

So 4% is pretty good, huh? Not by East Asian standards. From 1981 to 1990, China's growth rate averaged 10.1%, dipped to a mere 7.5% in 1991, then jumped to nearly 13% in 1992 and double digits for 1993. It's the same all over Asia, with countries racking up growth rates of 6% to 10% annually. Even stodgy India outpaced U.S. growth in the 1980s with a 5.8% rate. It expects 5.4% in 1993 and 6% in 1994.

No wonder corporations such as General Electric Co. are going for the growth--no matter where it is. GE has been placing heavy long-term bets in China, India, Mexico, and Southeast Asia to move the focus of the company to high-growth Asian and Latin American countries, away from the low-growth U.S. and Europe (page 64).

Faced with slow-motion expansion in U.S. and European revenues and worldwide disinflation that prevents price hikes, companies have been turning to cost-cutting to raise profits. But downsizing and layoffs have their limits. Moving into fast-growing countries allows companies to generate profits by expanding, not shrinking. It's a lot more fun for GE--and for everyone in the global economy.


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