New trends in the global economy dizzy multinational companies

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Leaders of the G20 countries discussed in Seoul about rebalancing the world economy and multinational executives trying to figure out who will be the most appropriate move.

The Chinese have become in recent years the most attractive target for Western companies considering that most markets here recorded double-digit annual increases. The consulting company Bain & Co.. argues that “Asian dragon” will soon become the third market for luxury goods after the United States and Japan.
“Multinational companies are key to re balancing the global economy,” said Raghuram Rajan, an economist at the University of Chicago. These scans phenomena taking place on the international stage to discern whether the American consumer has become really more sparingly or European economies will stagnate.

Challenges faced by companies such as Briggs & Stratton, a U.S. producer of lawn mowers, BMW or clothing retailer Gap shows that economic re balancing will be more complicated and risky than politicians suggest.

“How can you make people change their behavior? It’s very complicated,” said BMW chief financial officer Frederick Eichner.

The American market is essential

The only notable change in the global economy since last meeting of the G20 is focusing on the consumption of domestic products.

However, Germany and China reports major increases in trade surpluses, while the U.S. trade deficit continued to widen, increasing by 40% this year.

For multinational companies, the new global economic trends are staggering. The American market is so large that its stagnation could hardly be complemented by increases in consumption in other regions.

Manufacturer of lawn mowers Briggs & Stratton sees the shift to China difficult, because individual preferences of Asian consumers.

Also, Germany has a relatively small market for American Lawn Mower.

Briggs & Stratton potential markets spread grass grows everywhere, but things are not so simple.

Companies must adapt to cultural

Preferences and needs of consumers outside the U.S. are different. Association with the American middle class suburbs, houses with lawn and “ritual” of mowing grass on Saturday morning the company to change its strategy depending on the cultural challenges.

In general, the Chinese middle class who are living in flats and not houses, so demand for Briggs & Stratton products is low there. Germany has houses with lawns more than the Americans, and German consumers prefer electric grass cutting machines.

Although the U.S. manufacturer has been forced to lay off 7,000 employees, he sees opportunities for Chinese agricultural market development, which is to calibrate some of its products.

Retailer Gap has tried to enter the German market, but withdrew in 2004 after rental costs proved too high.

Now the company is opting for online stores dedicated to European consumers to reduce costs and limit risks. The difficulty of apparel manufacturers expand global markets is well known, and Gap does discordant note.

However the American company trying to differentiate themselves from Zara and H & M on the Chinese market through competitive pricing and customized products for Asian audiences.

BMW themes of addiction in China

Market in China is the third largest BMW and sales have doubled in the last year, while traditional markets in Europe have had modest growth of just 5%.

But BMW have generated high political risk to accept autocratic government in Beijing, which can always change the law to benefit domestic producers through the application of sales taxes that would discourage the European cars.

Other multinational companies could turn to China to benefit from increases in the markets for luxury goods, valued at $ 13 billion. The consulting company Bain & Co.. argues that “Asian dragon” will soon become the third market for luxury goods after the United States and Japan.

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Posted by M.P.Bogdan on Nov 12 2010. Filed under Featured News, Industry. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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