Unbelievable Growth Is Just Beginning By Chuck Saletta May 7, 2007 In the past, the United States was a worldwide engine of prosperity and economic stability. Many of the global benefits from its economic power came from offshoring activities. Things like Chinese manufacturing, Taiwanese electronics, Indian software development, and Costa Rican business services provided the initial fuel and capital for the current global boom.
All those first-generation activities had one thing in common: They were all based on goods and services destined for use in the United States. The old joke about the global economy was, "When the United States sneezes, the rest of the world catches cold." Sure enough, if the U.S. faced a recession, it knocked much of the rest of the world for a complete loop.
So who gets the credit for offshoring's success? Much of it boils down to simple economics. The companies who've moved production overseas have been able to attract high-quality employees for a fraction of the price of hiring Americans. While these wages seem low by American standards, they tend to be good for that specific country.
The next boom That act of paying relatively decent wages for the cost of living has spurred a new phenomenon in many formerly impoverished countries: a middle class. While that may not sound like a big deal to the average American, it is a huge deal for the rest of the world.
Taken as a whole, a solid middle class absolutely dwarfs the spending power of anyone else. While the ultra-rich may have a whole bunch of money, there are only so many of them around. To have a strong local economy, instead of simply an export-driven one, a country needs a solid middle class.
Make money globally Because of this phenomenon, companies are lining up to serve -- and profit from -- that emerging global middle class. Unfortunately, prospering overseas takes a bit more work than simply opening a foreign office and setting up shop. Some unique concerns that multinational companies face include:
Currency fluctuations Workplace culture clashes Unfamiliar consumer tastes Political risks to the business and its products International accounting differences In spite of the tremendous potential of our global economy, those international issues mean it's still tougher to prosper overseas than it is at home. As such, the odds greatly favor those companies that have already garnered success on a global scale. After all, they've already mastered the intricacies of operating around the world, giving them a tremendous leg up on the competition.
So, who's already winning? Perhaps you've heard of a few of these companies:
Market cap (in billions)
AstraZenica (NYSE: AZN)
LM Ericsson (Nasdaq: ERIC)
Sony (NYSE: SNE)
Bayer (NYSE: BAY)
Philips Electronics (NYSE: PHG)
Wipro (NYSE: WIT)
Luxottica (NYSE: LUX)
Every last one of them is:
A multibillion-dollar business Headquartered outside the United States Already a global powerhouse in its industry Poised to go wherever consumer demand takes it Thanks to what these companies have already gone through to get where they are, each is in a prime spot to profit from the tremendous growth that is just now starting in domestic markets worldwide.
Buy the world With so many global powerhouses located outside the United States, you're leaving money on the table if you only focus your investments at home.