Exporters are lauded locally in most countries; but when they start establishing offshore operations in manufacturing or product development, they are quickly castigated for doing so. The critics have a very naive and short-sighted view. For over a decade, I’ve been arguing that exports are not enough:

The world’s most successful companies do not just export globally - they operate globally. That means having sales, service, logistics, production and development operating around the world. Look at the world’s greatest companies. How many do things only at home to ship out to the rest of the world? I can only think of one - Boeing. The others made the leap from exporting to international operations…. To minimise the cost of distance - freight, duties, foreign exchange risk and in-transit inventory; to reduce production costs, through greater volumes, lower material costs and lower manufacturing wages (an unpleasant reality); to get closer to customers for more efficient service and faster reaction to changing needs; to build critical mass for future investment; and to build credibility with large global customers.

I’m glad to hear, via The Independent’s Nikki Mandow, that others are pushing the same message.  At the Export New Zealand-organised Go Global conference in Auckland today, Jonathan Ling (the head of corporate heavyweight Fletcher Building) surprised many of those present by arguing that lifting the country’s outbound foreign direct investment is essential for future economic prosperity.  Despite some problems, overall Fletcher attributes enormous benefits to its offshore activities.  On a smaller scale, others report similar nett gains.  Even the government is getting the message, with more equitable tax arrangements for offshore direct investment.

Here’s why I think it’s a good idea for countries to encourage outbound foreign direct investment:

Global companies like Nokia, Vodafone, and Nestlé operate in many countries. The interesting thing is that large numbers of their high-value jobs are still at home- in development, marketing, and corporate administration. They are surrounded at home by a plethora of supporting organisations- in banking, IT, law, accounting, advertising, travel, short-run early-stage manufacturing, research, education, etc. Together, they bring home huge revenue and profit streams.

If New Zealand wants a high-value economy, it needs more than just exporters. It needs global businesses that operate offshore in all facets of their business. New Zealand should encourage its businesses to invest offshore, not deride them for it. Without global operations, we won’t get a Kiwi Nokia or Vodafone. With global operations, we look like getting a Kiwi Nestlé. We could sure do with some more.

The alternative is to repeatedly build small niche businesses and sell them off for  a few million dollars; great for the founders, but not a sustainable and substantial national economic strategy.

HSBC, one of Britain’s leading banks, has published a special report, “The Future of Business” (executive summary .pdf)“. Commissioned from The Future Laboratory, it is based on TFL’s own desk research, a 10-question survey of 500 business leaders, and interviews with 18 experts on business, economics, technology and youth culture.

The executive summary (the only part of the report that I could find online) gives a simple introduction to what’s hot or at least trendy in British business thinking and social evolution. The main themes:

• The rising importance of major new industries - robotics, cybernetics, nanotech, computer gaming, biotech, stem cell research, nutriceuticals, renewable energy.
• Increasing focus on cities rather than regions, including more intensively clustered industries and the emergence of knowledge-based super-cities.
• New business economics linked to philanthropy, high human interaction and greater attention to emotional needs. Increased incidence of micro-multinationals (NZ readers know all about them), “collaborateering” (a new version of “coopertition”?) and crowd-sourcing.
• Key social trends: multi-jobbing or portfolio careers and the blurring of private and business networks and channels.

Without the main report, it’s hard to see what serious data and analysis lie behind these soundbites.  Some of them are plausible, but I’m sceptical of “pop” surveys. They typically lack scientific rigour, are very prone to “flavour of the month” bias in both design and conclusion, and they frequently assume enthusiasts and elite groups are representative of the whole economy and population (they’re not alone in that). Twee jargon and concepts such as Brighton being a super-city of “the alternative economy” only inflame my prejudices.  The report’s worth a read, it gives you a sense of some of what’s changing in Britain, but I won’t be basing any serious business decisions on it.