Affirmative Action, New Markets, and the Struggle For Economic Freedom

By G. Alfred Kennedy
Managing Partner
Source International, Inc.


A verity for the new millennium is that the current assault on affirmative action programs and laws that protect the rights of America's minorities will continue - even intensify. It is revealing commentary that the economic, political, and social progress by those whose history included enslavement, has generated such virulent antipathy. The less people of color become a ward of the taxpayer, the more successful they become in living the American Dream as equal partners, the greater the perceived threat of those who insist that the long-established practice of affirmative action must prevail. The call to arms has been issued.

The struggle is real, the stakes are high, and the commitment to fight this assault must be total and unequivocal. The struggle also must be waged on two fronts: domestically to preserve hard won gains, and, in international markets to create new opportunities to grow, prosper, and compete. The assault on affirmative action today is as coordinated, tenacious, and ferocious as the assault that galvanized African-Americans and their allies into action a generation ago. Today, the stakes are considerably higher: the economic future for all of America's people of color.

America's minority communities have a tremendous stake in the outcome of this current struggle. Minority entrepreneurs in America are generally owners of small-to-medium-size firms. These firms fuel America's economic engine because they are responsible for six out of every ten new jobs. Within the African-American and Hispanic-American business communities, they have created more than 300,000 new businesses since 1992. They hire primarily from within their own communities. The economic future for these communities, therefore, is a function of the viability and competitiveness of the minority-owned companies that hire, train, and promote job seekers from within their ranks. Even if they win this latest battle, they could lose the larger war to protect economic freedoms.

The struggle for economic viability is not a zero-sum game. The minority communities in America have to expand the economic pie to include opportunities not only in domestic markets, but in global markets as well. This is the future. The imperative today for the minority owned business community is to think globally. As Los Angeles civil rights attorney Connie Rice points out, Latino groups are looking to Mexico, and Asians toward the Pacific Rim.. African-Americans can do no less. They, too, have the concomitant responsibility to seek new opportunities in new markets if they are to remain viable business entities and, what is more important, competitive. They can no longer depend solely upon the American market to absorb its output of goods and services. They must cast their nets upon a larger sea of opportunity: international markets.

The reality is, since the Oil Shocks of 1973 and 1976, the American market is no longer under America's total control. That market is being contested fiercely by America's principal trading partners and commercial rivals. The American market itself is more open than ever. Each new emerging economy seeks to strengthen its export sector by exporting to the world's most accessible economy: the United States. Successful minority and female-owned firms are the most vulnerable players in this market access game and thus more susceptible to assault.

Why International Markets?
Because affirmative action is not an issue here. It is as simple as that. What is at issue is the breadth of individual strategic vision. Thus, the possibilities are unlimited. In today's economy, the minority and female-owned small- to medium-sized enterprises can no longer live, compete and prosper without thinking globally. If the current assault on affirmative action compels this community to finally accept this reality, then seize the opportunity. The reality of the new millennium is that the world must be their new market.

What does it mean to think globally?
In simple terms, it means to think, plan and act strategically. Enterprises are people organized in search of opportunity. For the minority business community, the larger business objective is to strategically link people with opportunity and then link people and opportunity with profit. The marketplace for goods and services is constantly changing. Each day unleashes a vast spectrum of opportunities that can develop and enhance the savvy, aggressive entrepreneur's ability to compete in new markets. This is why the minority business community exists. The new opportunities are a function of individual willingness to tie into global labor pools, markets, capital sources and technologies.

The Markets.
Once the critical decision is made to expand globally, the next large question is twofold: Where, and what, is the payoff? The African-American, Hispanic-American, and Asian-American business communities know that the U.S. Department of Commerce has clearly identified the export opportunities in the Ten Big Emerging Markets of the next century. Those markets are the Chinese Economic Area (China, Hong Kong, and Taiwan), South Korea, the Association of South East Asian Nations, India, South Africa, Poland, Turkey, Mexico, Brazil and Argentina. These ten countries comprise half of the world's population and account for more US exports than Europe and Japan combined. According to the U.S. Department of Commerce, these emerging markets are expected to double their share of the world's imports to nearly 38 percent by 2010, up from 19 percent in 1994. American exporters are expecting to sell a trillion dollars a year to these markets by that time, up from $200 billion dollars US two years ago. No other market approaches this level of growth. The question is, do these new markets factor into the business plans of female and minority-owned enterprises? If not, why not?

Market Sector Opportunities for the Millennium.
What are these emerging markets buying? Four of the six big sectors identified by the Department of Commerce fall under the umbrella of high technology: information technology, environmental technology, energy technology, and health-care technology. Two other hot prospects in these markets are transportation and financial services.

The incentive for minority and female entrepreneurs to embrace these markets, to adopt a global vision and growth strategy is that in the 21st century global economy, emerging nations will provide almost half of the potential customers for western goods and services. Three of every eight middle-class consumers will reside in the developing world. Ninety-five percent of the world's current population growth is occurring in the developing world, whereas only 5 percent of global population gains are in the advanced nations of Japan and the industrialized west (United States, Canada, and Europe). Nearly 60 percent of the world's people currently do, and in the future will, live in Asia.

The minority business communities should look carefully at these and other emerging markets, because of their potential as regional economies, and because they share certain characteristics. They have large territories and populations, and they are undertaking extraordinary development projects that call for new infrastructure, such as power-generating plants and telecommunications systems. The business community knows that with development comes increased demand for consumer goods like computers and related electronics, household appliances, fast food and the full range of products in demand by today's middle classes around the globe.

These countries have developed market-based economic practices leading to faster growth and expanding trade and investment with the rest of the world. They have taken steps toward economic reform to become players in the global economy. Some of them aspire to be technological leaders. Their economic growth and prosperity will have enormous spillover into their respective regions. This is the incentive to look at these markets for the future. The challenge for minority investors is to develop a phased strategy to identify and link these emerging middle classes to business opportunities, and then link those opportunities to profits.

These markets should not be viewed as economic long shots. In the Pacific Rim, for example, The Pacific Economic Cooperation Council, in its 1999-2000 Economic Outlook, says that the crisis in the Pacific is over and the region is on the path to recovery. Sixteen of the 19 Pacific Rim economies should return to positive growth rates. As potential entrants into the world of global marketing, it is incumbent upon the individual minority investor to analyze these economic predictions to fully evaluate their potential on their company. Once they do, they may discover opportunities beyond those I discuss here.

The Risk Factor.
Are there risks in going global? Absolutely. However, there are enough success stories out there to tell you that the process can be exciting, challenging, and, above all, profitable. As a business community, you are already accustomed to weighing risk against profit. Now, it is necessary to weigh the advantages of global extension against the lost opportunities caused by hunkering down at home, fear of economic uncertainty abroad and the challenges of navigating foreign social systems, business practices, and legal systems.

Doing Business in the Markets of the Millennium - What Does it Take?
Doing business in emerging markets requires a different set of skills than you might employ in Europe. Generally, business in emerging societies is conducted on a more personal basis. Success requires patience, persistence, and presence. You will be required to visit a country in which you wish to trade or invest. It is vitally important to make contacts and establish a comfort level with your prospective trade or business partner. This takes time. You do not accomplish this by phone or fax as you might in Europe, Canada, or the United States. Your prospective partners are looking for long-term commitment. An excellent way to become familiar with a prospective market and to establish useful contacts is through trade missions at either the state or federal level. Information about trade missions is readily available.

The Payoff.
The minority investor should keep in mind that these big emerging economies are tightly interconnected with their respective regional markets and, therefore, serve as gateways to what will be, perhaps, the next tier of emerging markets of 2015 and beyond. If as an investor you dwell on the pitfalls of global extension, you may fail to seize opportunity. Opportunity is what awaits the informed, the prepared investor. It has been my experience that the pitfalls in a venture are largely the purview of the unprepared, the unaware. So, I would encourage potential investors to set aside apprehensions about doing business in social systems different from their own. From lengthy experience, I know that at the end of the day, you will be judged by your ability to deliver - to service what you deliver - and to make good on your promises. Performing the due diligence and remaining aware carries the day.

As I look ahead to the new millennium, I am encouraged on several fronts. One, the prospects for world trade appear bright despite the most serious global financial and economic crises since World War II. Second, the performance of the American economy - a strong dollar, low inflation, and a bullish stock market - suggests to me that the American economy will continue to be the locomotive of global economic growth. Americans still have a great propensity to consume imported goods. The future for world trade is especially bright given that our principal trade partners are our nearest neighbors. This means that Mexico and Canada are likely to continue to benefit directly from the strength of the American economy. And, third, our economy may no longer be as constrained by the dynamics of so many emerging markets. NAFTA membership has reaped dividends for the American economy with Mexico replacing Japan as our number-two trading partner. In countries in Eastern Europe, Africa, South Asia, and the rest of the Americas, markets have basically stable and vigorous economies. For the minority investor, there is enormous opportunity in international markets. The assault on affirmative action will not diminish because its intent is to diminish the ability of the minority investor to compete for the opportunities available in the U.S. market. While it is important to wage the struggle here at home, it also is important to define the next frontier for your products and services. The noise we hear should not be just that of doors closing to the minority business community but, also, of doors this community opens to new opportunities.

I feel it imperative for the minority investor to address those questions that relate to the positioning of their particular industry or business to take advantage of some of the business opportunities available in international markets. Address questions that relate to knowledge of your markets and the prevalent culture, to product adaptation, to zero error in production and maximum quality. There is a prescription for success. By all means and with all diligence, resolve the issues involved in knowing precisely who your customers are, what they want and what your competition will provide if you don't. Enlist the support of the right people to tailor your strategic plan to accommodate change, and to facilitate your research and development effort. Refine your business plan and then move your strategies into global directions.

The new verity is that, as a business community, the minority investor no longer has the option of working with the First World, the Second World, or the Third World. A new international or universal time clock is currently being debated for the world of commerce. This new clock is based on Internet Time, therefore, time will be moving at the speed of sound or the click of the mouse on a computer. So, in today's integrated global market you can only adapt to a Fast World increasingly homogenized by technology. Any investor today has a choice: speed up and adapt to change or become a casualty enroute to the new millennium. The minority business community is accustomed to risk taking and adapting to change. This community must extend itself into global markets. It simply cannot afford to be left out, too much is at stake. What is important to remember is that the markets are there, opportunity is there. Be vigilant; plan for success and for failure. Be agile enough to make timely corrections in your strategy. Above all, be flexible.


Mr. Kennedy is a former senior Foreign Service officer, was the U.S. Consul General in Toronto, Canada (1993-1996), a Senior Advisor to former Commerce Secretary Ronald H. Brown, and a Deputy Assistant Secretary of State with the U.S. Department of State in Washington, D.C. He served in Italy, Germany, France, Belgium, the Republic of the Philippines and South Korea. Currently, he is a partner and owner of Source International, Inc., an international consulting firm with headquarters in the Washington Metropolitan Area. Web site: www.sourceinternationalinc.com. He is a contributing editor of The Black Business Journal.