The U.S. Department of Commerce Bureau of Economic Analysis recently reported some interesting data on the operations of U.S. multinational companies at home and in foreign countries. Worldwide capital expenditures by US multinational corporations increased 3.9 % in 2012 to $621 billion. The rate of increase in capital expenditure abroad by majority-owned foreign affiliates outpaced spending by US parent companies in the US. (Capital expenditures in the US by US parent companies increased 3.3 % ($447 billion), whereas capital expenditures abroad by majority-owned foreign affiliates increased 5.5% ($173 billion)). Similarly, the rate of increase in sales by majority-owned affiliates (8.6%, $5,197 billion) outpaced the increase in sales by US parent companies in the US (6.8%, $9,843 billion).
An important motivation for capital expansion abroad used to be to access cheap labor. This new data shows that companies are investing abroad to access fast growing local markets, primarily India, China, Eastern Europe and Brazil. See generally: Kevin B. Barefoot and Raymond J. Mataloni Jr., Operations of US Multinational Companies in the United States and Abroad, Preliminary Results from the 2009 Benchmark Survey.
The big thing for business now is real global competition as multinational companies scramble to sell goods and services to customers in foreign markets. Actually doing business in foreign countries is considerably more complicated than simply manufacturing goods abroad for sale at home. Building market share in a foreign country requires understanding of all of the same factors that support profitable business at home—customers, supply chain, costs, labor, regulation, politics, and taxes, to name a few. Growth in foreign markets is low hanging fruit, but profitable growth is not any easier over there then it is over here.
And that is very good news for US lawyers who are ready for global business.
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