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What International Politics Means for Stock Investment (Part 2)

17 January 2008 - Features - Editor

What International Politics Means for Stock Investment (Part 1)

Spatial Strength for the Top Stock Picks

What can we learn from corporations that succeed consistently in all kinds of political environments? Protection of proprietary know-how in home countries, excellence in liaison, decentralization of marketing, and strategic sourcing, are the four pillars of sustained success in global business. Companies that ignore these sources of strategic strength are likely to flounder in unfamiliar business conditions, and will be failures when foreign governments change abruptly.

Which country can do without Boeing and Airbus? Brazil has made impressive strides in civil aviation, but is a specialized player for relative small aircraft. China has announced intentions to build large aircraft, but it will be decades at least before this intention sees the light of day. Vital design and assembly operations for aircraft remain firmly ensconced in Seattle and Toulouse. Outsourcing is cosmetic and of little consequence in this sector.

We see the same type of protectionism in new molecule synthesis and development in the pharmaceutical business, as well as in the broader life sciences arena. Research and Development outside the home base is fragmented cleverly, conducted in wholly-owned subsidiaries, and effectively owned and managed by group headquarters.

Branding and government liaison are handled in diametrically opposed fashion to the protection of core strengths and technologies. Successful global corporations bend and sway to languages and habits of communities everywhere, and deal with politicians of all hues, free of judgment or imposition.

The automobile sector is a telling example of how strategic sourcing has shifted global dominance in the sector from the United States to Japan. Detroit has kept pace with marketing activities in emerging markets, but has lost the global scramble to procure scarce industrial metals, and has fallen behind in the hybrid engine story as well.

Currency is a new angle of the complex relationships between international politics and economic powers. Earlier expositions on national competitiveness require modifications as China accumulates decisive reserves of US dollars, even as it consolidates its position as the largest single supplier to the European Union. Modern stock brokers now accept investments in more than one currency, and this shift is at least as significant as the move from the stock market ring to personal computer screens.

Stock investment utopia has been redefined: earlier templates of financial reviews and national regulations have become inadequate if not irrelevant. The best stock picks of the future need global vision and qualitative analyses. Portfolios should be revamped regardless of your political leanings.

Are you concerned with the interactions between geo-politics and the companies in which you own stocks? Do you know the business cultures of emerging economies as well as you understand the workings of stores in your neighborhood? What about challenges to the economic dominance of the United States? Please join our forum and help our community develop an updated appreciation of how business and politics affect each other. We would love to hear from you!

 


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