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Are U.S. Based Multinationals Destined To Do Poorly In Asia?

Steven Hansen profile picture
Steven Hansen


  • USA based multinationals are not faring well in Asia.
  • The problem in general is that American's believe in an arm's length relationship with foreign governments.
  • This is in contrast to native business which allows itself to be the government's arms and legs.

I am always sensitive to business overhead - the lower you drive overhead, theoretically the higher your profit.

Overhead costs are expenses associated with running a business and not DIRECTLY related to producing a product or service. A simple criteria of overhead is costs that are fixed whether one produces a million or a zillion products or services. Direct costs are those that go up with each product or service produced. Some costs are semi-variable - with portions fixed and portions that go up with each product or service produced.

Obviously there are grey areas, and depending on the business sector, a particular cost may be overhead or direct.

Overhead cannot be zero - it takes a certain amount of overhead costs to effectively run any organization. For instance, research and development for a new product is overhead, as well as payroll costs.

The same thoughts of overhead and direct costs can be applied to government operations. Some of the government operations - say education - mostly varies by the number of students. Other operations - such as elected officials - are purely overhead. One would expect a general correlation to population or total employment.

I prefer correlations to employment - because it would include productivity variations. One would think this relationship between employment and government workers should be rather constant - but it is not. Part of the reason would be the transfer of government services to contractors. But no one knows the number of employees contractors employ. Some think the number is around one million but, if so, it makes little difference in the ratios (less than 5% of the total government employees).

Because the goverment employment relative to the private sector is shrinking, the above graph is saying that there is some combination of:

  • less government enforcement (such

This article was written by

Steven Hansen profile picture
Steven Hansen (A.K.A "The Hand") was born, raised and educated in California. Steven worked for 25 years for a major international engineering and construction corporation. He has lived outside of the USA almost continuously since 1978. Steven retired in 1995 to sail the world. He is still sailing today and is currently located in Malaysia. On the financial side, Steven is a pragmatist. His motto is to "go with the flow" and believes that the only correct investing method is one which makes you money both short and long term. He does not fall in love with philosophies – only results. He has invested well enough to retire at 45 and stay retired.

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