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Articles - Publication Date 9.1.2003
Bye-Bye To 'Buy American'?
Today's U.S. consumer marketplace is a melting pot of people, products and paychecks. Manufacturers need to ask: Does 'Made in America' matter to their customers anymore?
By David Drickhamer
Editor's Note: This is the fourth installment of a seven-part series that details the strategic and often gut-wrenching shifts taking place in manufacturing. It appears in the September 2003 issue of IndustryWeek. IW will introduce a new installment each month throughout the remainder of 2003.
Wal-Mart's story is as all-American as they come. It grew from a regional chain in the 1960s to $245 billion in revenues as of January 31, 2003 -- quadrupling sales in the past 10 years alone. Leadership, culture and logistical skills aside, the privately held company did it by giving customers the "best deal."
Frequently overlooked in this saga, Wal-Mart's astonishing growth corresponded with rapid globalization and the fall of many trade barriers. In recent decades the Bentonville, Ark., company has found more and more of its own best deals overseas. Measured in 20-foot ocean containers (291,900), Wal-Mart imported 60% more than The Home Depot in 2002 and 68% more than rival retailer Target. The $12 billion in goods that the world's largest company imported into the U.S. from China last year would make it that country's 8th largest trading partner if it were a sovereign nation , according to Bloomberg News.
To some in the United States, this sounds like bad news all around. But consider that Wal-Mart is the largest employer in this country, issuing paychecks to 1.3 million people, more than triple McDonalds' food franchises and corporation, the next largest employer at 413,000. Wal-Mart's deep-discount prices also give consumers a greater ability to purchase goods, thereby creating more wealth, as observed by Adam Smith in his 1776 opus, An Inquiry into the Nature and Causes of the Wealth of Nations: "It is a maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy."
And so, Wal-Mart represents both the good, and the bad, of global capitalism.
"Wal-mart sells Chinese goods and tons of it and people buy it because it's cheap. If I can get something for $5 less and I have four kids, that's where I'm going," says Jim Altfeld, a strategic-planning consultant based in Burbank, Calif., who is deeply concerned about the exodus of manufacturing from the United States. "With the consumer it is strictly price, and they're not going to pay more if it's an American-made good. They don't care."
Considering these points, U.S. manufacturers pinning their hopes on a "Made In America" slogan to see them through this time of globalization and fickle consumers may be in for an uphill battle.
When asked, most U.S. consumers today will say they prefer to buy American brands and U.S.-made products, but with the influx of foreign goods -- U.S. imports totaled $1.2 trillion in 2002, 11% of U.S. GDP -- buying American is no longer practical in some instances and impossible in many others. Other priorities, such as quality, durability, style and price -- especially price -- often take precedence.
This is plainly evident in the automotive market, where it's impossible to guess where many vehicles have been assembled, let alone where the parts came from. To help buyers, Congress passed the American Automobile Labeling Act in October of 1992, which requires manufacturers to identify a vehicle's final assembly point and components by country of origin. By making consumers aware of where their cars and trucks are made, the proponents of the automobile labeling requirements hoped to spur buy-American sentiment. That hasn't happened.
The market share of the traditional big three -- Ford Motor Co., General Motors Corp. and DaimlerChrysler's U.S. operations -- has been slowly declining since the 1950s, and has continued to fall since 1994, when the Labeling Act went into effect. It fell 1.4% to 60.6% in 2002, according to Automotive News. In 10 years, industry analysts predict that imports and foreign brands will accoun
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"With the consumer it is strictly price... They don't care."
-- Jim Altfeld, strategic-planning consultant
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