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To Grow Faster Temper Your Optimism with First-Hand Information

Mar 13, 2008
As currency volatility increased in the late 1990s, Molex (an electrical component manufacturer) had reason to be concerned. On the other hand, the company was proud of its "can-do" heritage of growing faster and with better financial ratios than the bulk of its worldwide competitors.

Unfortunately, Molex produced more than 40 percent of its annual income from selling products in the very countries that were experiencing the most difficulty with their currencies. In many cases, the company also manufactured products in those same countries.

The company also knew that it faced an irresistible force: Almost all profit growth in its industry comes from new products, and these are expensive and time-consuming to design and produce. Reduced demand for existing products would mean a drastic drop in profits.

The company immediately reacted to the currency plunges by taking all of its best people and put them into the troubled countries for as long as it took to understand the irresistible forces affecting the local economies. This commitment to finding out what the company was facing made the difference.

Here are some of the things they found, and what they did to adjust.

First, in some countries, the local currency was devalued by more than 50 percent. This circumstance meant that imported materials now cost double or more what they had before.

Molex moved quickly to raise prices for customers in the local markets where the currencies had dropped to reflect those changes.

Second, the local economies were thrown into severe recessions by the devaluations, which meant that local customers would not be buying very many products.

Molex quickly fanned out its salespeople to locate new customers in other countries (such as in Europe and North America) who would want to buy imported goods built in Asia at much lower prices than Molex had formerly charged.

Third, Molex kept its commitment to expanding new product development and focused more on the needs of its newest customers who were less affected by currency and economic changes.

A year later Molex had experienced only a single quarter of modestly lower earnings since the currency volatility started. Revenues and market share climbed every quarter, and financial ratios actually improved.

Other companies in the industry had severely reduced profits that continued for a much longer time. Asked to explain the company's success compared to its competitors, Molex's CEO replied that he now understood why some airlines based in countries with new economic woes had shown greatly increased earnings during this time period: because so many companies had had to buy so many airline tickets to solve their newly-created problems.
About the Author
Donald Mitchell is an author of seven books including Adventures of an Optimist, The 2,000 Percent Squared Solution, The 2,000 Percent Solution, The 2,000 Percent Solution Workbook, The Irresistible Growth Enterprise, and The Ultimate Competitive Advantage. Read about creating breakthroughs through 2,000 percent solutions and receive tips by e-mail by registering for free at

http://www.2000percentsolution.com .
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