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What's Your Global Market Price?

Written By: Ann Grackin
Published On: October 20 2004

Introduction

"The United States has nothing to fear from commercial engagement with the rest of the planet."

Who said this?

Alexander Hamilton, the first Secretary of the Treasury of the United States, and probably the one individual most responsible for the financial and commercial system we have lived under for over 220 years. He went on to say, "The maxims of the United States have hitherto favored a free intercourse with all the worlds. They have conceived that they had nothing to fear from the unrestrained competition of commercial enterprise and have only desired to be admitted to it upon equal terms".

Interestingly, at the start of this United States, there was a fierce raging debate between the Federalists—George Washington, Hamilton, Adams, etc.—, and the Republicans—Jefferson, Madison, and later on Monroe—, on the kind of economic system we should have.

Jefferson, a quasi anarchist, who while in Washington's cabinet actually was a seditionist, met secretly with the French, behind Washington's back, to try and promote his various causes. Washington, always the statesman, tried to get Jefferson to work with the rest of his cabinet. The battle was so hostile that Jefferson later resigned from the cabinet. Jeffersonian doctrine basically held an anti-British tone, but more importantly, favored an agrarian's society (he was a large slave and land holder), versus Hamilton's manufacturing and commerce orientation.

So fierce was this divide that by 1804, while Jefferson was president, a succession and revolt from the union was being secretly plotted—by the North!

I give you this bit of history to point out an obvious fact. This is still the issue!

World Trade Contention Issues are About Your Salary

OK, you are tired of this bit of history, but if you look at the huge contentious issues of today these economic issues rule.

Global trade advocates WTO, IMF, etc., tell the various countries that they have to open up their markets to global price levels. Many of the developing nations are having a hard time with this concept. But let's take it a bit closer to home.

Home Depot announces the creation of ten thousand jobs—great news—with starting salaries at $7.00 to $20.00 an hour. The same basic price for workers in India and China—except that they are doing manufacturing to computer programming at those prices.

If you make $14, 560 a year from Wal-Mart or Home Depot, you are considered at the poverty level in the US. Yet this salary is a bonanza in many other parts of the world.

The discussion is that once China lets their currency float, their prices will go up ... but we think that is a false assumption. First, India and China still have massive unemployment and a huge poverty base. And there would be huge unrest in China (something to be avoiding at all costs) if more of these unemployed are not brought into the working world—at some level. In addition, there are still global labor markets that are still willing to work for less—Vietnam, Thailand, etc.

When Do We Get a Raise?

So, the point is, there will be continued downward pressure or flatness in US salaries unless there is a refocus on highly differentiated services, products, and growth strategies. Going forward with a plan—need to drive a different approach here.

  • Stop outsourcing and build passion in your organization. There can only be one low cost provider in the market. Look at the Telco market—a truly devastated sector—a landscape of struggling companies all chasing the same supply chain strategies. It's not working! You all outsourced! And sales are still going down. Poor performance is expected in firms that have less than loyal workforces. They have no future with you!

  • Change the game—innovate your product and services. Most customers tend to be less than satisfied with the products they get and the services they receive. Study after study says customers will pay (more) for getting what they actually wanted, yet most firms seem to be obsessed with cutting cost (and services and quality and details). But unless you spend a minute and truly consider the customer, you won't develop that high margin product. Look at the airline industry. Given a choice on the flyers' chosen root, they are apt to switch, since they are treated so poorly by the airlines! Your customer does not envision their future with you!

Unless you want to be doomed as the low cost provider—your personal salary—you need to lead the management revolt. Enterprises are composed of people—us. Be part of a transformation to differentiation and growth.


This article is from Parallax View, ChainLink Research's on-line magazine, read by over 150,000 supply chain and IT professionals each month. Thought-provoking and actionable articles from ChainLink's analysts, top industry executives, researchers, and fellow practitioners. To view the entire magazine, click here.

About the Author

For more than two decades, Ann Grackin, Chief Executive Officer, has been on the frontlines of the Supply Chain Management technology and e-commerce frontier, leading global strategy and technology implementations in the high technology, semiconductor, automotive, textile, and apparel industries.

ChainLink Research is a bold new supply chain research organization dedicated to helping executives improve business performance and competitiveness.

 
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