US business looks less to Washington as operations go global
BUSINESS OPINION:IN RECENT years, Tupperware has seemed to epitomise the American dream.
Seven decades ago, Earl Silas Tupper stumbled on the idea of using rubber seals for plastic boxes. And from those humble origins, a direct-sales giant emerged, with those “Tupperware parties” selling plastic to millions of housewives. But these days those air-tight boxes come with a twist. Four decades ago, 90 per cent of the company’s sales were in the US. Now, however, 90 per cent are outside the US.
Tupperware might look as American as apple pie, and its headquarters are even in Orlando, near Disneyworld. But it is not American consumers now driving the group’s success, but those in Indonesia or Korea or Germany. And the company is structured accordingly. It has shifted much of its production overseas and only 1,000 of its 13,600 employees are in the US. “Our number two is English, our head of manufacturing and sourcing is Belgian, our head of human resources is German, our head of tax is Czech, one of our group presidents is a Swede, the other a Colombian,” observes Rick Goings, Tupperware chief executive.
Washington should take note. As the US gears up for the 2012 election, endless rhetoric is being tossed around about what “American” business needs from Washington. Politicians have been anxiously debating, for example, what might prompt business to create American jobs or invest their estimated $2,000 billion of spare cash. Pundits have asked how “American” companies will react to fiscal gridlock. And when Barack Obama recently suggested American business should be grateful for the US’s social infrastructure, it had the blogosphere buzzing.
But this discussion is overlaid with contradictions. As Tupperware shows, many successful “American” companies are no longer particularly American. Never mind the well-known exodus of manufacturing jobs or large companies holding about 60 per cent of their cash outside the US, according to a JPMorgan study. What is less widely appreciated is that corporate dynamos are less tethered to the “domestic” market.
Just look at the data. According to figures assembled by FactSet, information technology companies in the SP 500 draw 54 per cent of their revenues from outside the US, up from 42 per cent a decade ago. In the materials, consumer goods and manufacturing sectors, those ratios have also risen by about 10 percentage points in this period to 45 per cent, 35 per cent and 34 per cent. And for some companies, the proportion is far higher: just look at Texas Instruments (89 per cent), Bristol Myers (82 per cent) and Intel (79 per cent).