Real Illusions

Jerry Flint writes a regular column on cars for Forbes magazine. In his April 7 piece, he castigates Chrysler (now owned by private equity firm Cerberus) for its “global illusions.” I think he’s right for the right reasons, and those right reasons have some important implications for leaders in any industry. Basically, Flint’s point is that if Chrysler can’t find customers in the U.S., what makes it think that it can find customers abroad? Despite ruinous price cuts and incentives (all of which depress margins, cash flow, and product buzz), Chrysler’s U.S. sales fell 3% in 2007 to drop market share to 13%. Don’t count on a wave of cool new products in the pipeline, either. As Flint observes, Chrysler is “killing more vehicles than it’s bringing out.” So once again: If American auto buyers aren’t itching to buy Chrysler cars, why would buyers abroad be? Especially since only two of Chrysler's models made the Consumer Reports list of recommended models for 2008. Especially since four of its models rank in the bottom ten of Consumer Reports worst cars for 2008. So, throwing in more of my two bits, here’s the lesson for all you leaders. Yes, we operate in a truly global economy. And yes, looking beyond one’s borders for new sales opportunities is in many cases a competitive must. But no, don’t look at “going international” for sales boosts as some magic bullet for your “non-international” corporate woes. If your domestic product/service mix is unexciting or flawed, or if your domestic business model is yielding uninspired margins, earnings and stock values, then going global might boost your top line, but it won’t do anything to enhance the kinds of returns on investment that make a difference to stockholders. On top of that, remember that going global requires some serious investment in product enhancement, systems integration, human resource development, logistics, marketing, relationship management, and such. Hence, the happy dream of fat international sales can become an expensive nightmare—unless you’ve got both a solid, compelling base here at home, and the capacity to adapt and customize that solid, compelling base to other countries.