Here is the latest post by Joseph A. Maciariello featured in the Joe’s Journal series at the Drucker Exchange (Dx) The Drucker Exchange, a platform for bettering society through effective management and responsible leadership. The Dx is produced by the Drucker Institute, a think tank and action tank based at Claremont Graduate University that was established to advance the ideas and ideals of Peter F. Drucker, the father of modern management.
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“Increasingly, the economic process depends on structures built upon alliances, joint ventures, and outsourcing. Structures that are built upon strategy, rather than ownership and control, are becoming the models for growth in the global economy. Executives in these partnership structures should organize and manage corporate strategy, product planning, and product costing as one economic whole.”
– Peter F. Drucker
In early March, I was doing some teaching in Brazil, and during my stay, I met a retailer of articles for small gift shops who was from Austin, Texas. I talked to him on each of three nights at the social hour on the top floor of our hotel, and inevitably the talk got around to his business.
He was in São Paulo visiting and evaluating his distributors at various trade shows all around that huge city, the eighth largest city in the world by population. As I talked to my American friend, who was also fluent in Brazilian Portuguese, I learned some of the realities of global alliances and strategies, which Peter Drucker speaks of in this passage. This man was sourcing small gift items of all kinds from manufacturers all over the world—always looking for quality but at a very low price. Low price was decisive for him because of the very high import tariffs in Brazil. He was forced to search for very inexpensive import providers because the price of sale by his São Paulo distributors had to include tariffs, as well as profit for him and his distributors.
I also heard over and over again during my stay that a Ford Focus, which retails in the United States for about $20,000, sells in São Paulo for $50,000. The difference consists principally of Brazilian taxes in the whole value chain for the Ford Focus. It must be for that reason that our driver had what was considered a luxury car in São Paulo: a comfortable, four-door XLE Toyota Corolla Sedan. This small example illustrates the realities of global business, global sourcing and global alliances. Welcome to Global Business 101.
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Joseph A. Maciariello is the Horton Professor of Management & Director of Research and Education, The Drucker Institute. You can contact him directly at email@example.com.