, and fell by 10.6 percent from 1992 to 1993.
The most trouble geographic segment, however, is Europe. While sales in the United States and the rest of the world have been mixed over the 1991 to 1993 period, sales in Europe declined steadily, falling five percent from 1991 to 1992 and another 13.5 percent from 1992 to 1993. Operating income for Europe plummeted from $372 million in 1991 to a loss of $90 million in 1992, but the operations regained some momentum in 1993 so that only a loss of $1 million was posted for that year. Clearly, the company needs to take steps to bring its European operations back into line with the rest of the organization.
The three geographic divisions that Dow uses are illustrative of different stages in product and market lifecycles. The United States and Europe are in mature phases, where it is difficult to gain additional market share and where profits are difficult to come by as many products compete for shrinking sales. The "rest of the world" represents a growth market where there is still strong potential for market penetration and even market leadership. There are still economies of scale to be realized in these growing markets, and Dow has apparently been able to take full advantage and realize growing profits even to the point that operating profits outpace sales.
Dow is unable to entirely control the risk of its foreign exchange operations. The company does business in some countries where currencies are relatively stable (such as Canada and Germany), but also has operations in countries which have highly volatile currencies, such as Brazil. Since Dow must report all of its operations in dollars to be in compliance with Securities and Exchange Commission (SEC) rules, this poses a particularly difficult problem where foreign exchange is concerned.
However, the company has been prudent in its foreign currency management by refraining from participating in financing foreign operat...