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What’s Happening?!. You will be color coded when you make a reservation on an airline. Bush proposal regarding illegal immigrants has hyped a big “made in America” and job security debate. After all, it is an election year!. ATP Assignments. ATP Assignments. The Plan!?.

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what s happening
What’s Happening?!

You will be color coded when you make a reservation on an airline.

Bush proposal regarding illegal immigrants has hyped a big “made in America” and job security debate.

After all, it is an election year!

the plan
The Plan!?
  • Start researching material immediately.
  • Read syllabus regarding the assignment.
  • Look at the Boeing paper in the textbook plus the
  • Wal-Mart paper on the course web page.
  • Use links on web page for your company.
key factors
Key Factors
  • Industry definition.
  • “Big Picture” data regarding the industry.
  • Business and IT leaders.
  • Porter Competitive Model analysis.
  • Business Strategy Model.
  • Identifying strengths and weaknesses of the company.
  • Figuring out who runs the business on a day-to-day basis and the relationship with the person running the IS organization.
  • Concluding what the company changed through the use of Information Systems.
chapter 1 summary

Chapter 1 Summary

Business and Information Systems Management Challenges

overview of chapter 1
Overview of Chapter 1
  • Three Necessary Perspectives
  • Simultaneous Revolutions in the Business Environment
  • Systematic Approach to IS
  • Three Roles of IS
three necessary perspectives
Three Necessary Perspectives
  • Business Environment
    • Specific Industry
  • Enterprise Environment
    • The Company Itself
  • IT Environment
    • Creates a Competitive Advantage

*Must understand the Business and

Enterprise Environment first*

Business

Success

simultaneous revolutions
Simultaneous Revolutions

New

Competitors

New Rules

of Competition

New Political Agendas

The

Business

Industry Structure

Changes

New Technologies

New Employees

and New Values

New Regulatory

Environment

Increasing

Customer Expectation

systematic approach to is
Systematic Approach to IS

Vision

Strategy

Tactics

Business Plan

  • Competitive Options
  • Roles, Roles, and Relationships
  • Redefine/Define
  • Telecommunications as the Delivery Vehicle
  • Success Factor Profile
three roles of is
Three Roles of IS
  • Efficiency
  • Effectiveness
  • Competitive Advantage
three roles of is12
Three Roles of IS
  • Efficiency
    • Doing things better overall
  • Effectiveness
    • Doing better things within the organization
  • Competitive Advantage
    • Doing better and new things for the customer
in conclusion
In Conclusion….
  • Three Necessary Perspectives
    • Business / Enterprise / Information Technology
  • Simultaneous Revolutions
    • Competitors / Rules / Structure / Regulatory / Customer Expectation / Employees / Technology / Politics
  • Systematic Approach to IS
    • Separate Business from IT
  • Three Roles of IS
    • Efficiency
    • Effectiveness
    • Competitive Advantage
chapter 1 questions
Chapter 1 Questions
  • Why is it important to know the business environment and enterprise environment before addressing the IT environment?
  • Identify and explain the three roles of Information Systems including a specific company example that emphasizes each of the roles?
chapter 2 business competitive environment

Chapter 2Business Competitive Environment

“The global market will come to you, if you don’t come to it.”

competition can be
Competition Can Be…
  • Local
  • Regional
  • National
  • International

Going to be taking a look at competition, defining it and then focusing on global competition.

what is competitiveness
What Is Competitiveness?

“The degree to which a nation can, under free and fair market conditions. Produce goods and services that will meet the test of international markets while simultaneously maintaining or expanding the real income of its citizens”

Three Inputs to improving domestic performance

  • Human Resources
  • Capital
  • Technology
slide19

Competitiveness: A Link to National Goals

Decreased

Budget

Deficit

Stronger

National

Security

Human

Resources

Trade

Policy

Improved

Domestic

Performance

Increased

World Market

Competitiveness

More and

Better Jobs

Capital

Reduced

Trade

Deficit

Increased

Standard of

Living

New

Competition

Technology

Figure 2-1

how does a company gain a competitive advantage
How does a company gain a competitive advantage?
  • Provide a value to customers
    • Real
    • Perceived
  • Knowing/Understanding
    • Products
    • Customers
    • Competitors
international competitive advantage
International Competitive Advantage

The way companies achieve competitive

advantage in the global industry is based on

the role played by the home nation.

slide22

The Diamond National Advantage

Firm Strategy, Structure and Rivalry

Chance

Factor

Conditions

Demand

Conditions

Related and Supporting Industries

Government

Fig. 2-2

the government s role
The Government’s Role
  • Catalyst
  • Challenger
overview
Overview
  • What competitiveness is.
  • How a company can gain competitive advantage.
  • How to gain an international competitive advantage
  • The government’s role in fostering home-based companies.

“All good things take time.”

chapter 2

Chapter 2

Business Competitive Environment

position some important factors
Position Some Important Factors

1. The definition of competitiveness.

2. The key elements of competitive advantage.

3. The role of the nation relative to companies that compete successfully on a global basis.

4. The role of government within a nation.

While contemplating the idea that information

technology could make a difference.

global economy
Global Economy

Why the emphasis on globalization and the importance of global competition?

business environment
Business Environment

The global market will come to

you, if you don’t go to it.

an essential roadmap
An Essential Roadmap?

Do nations, companies and individuals need to build wealth in a knowledge-based global economy?

How significant in creating wealth are breakthrough technologies in microelectronics, biotechnology, new materials, telecommunications, robotics, and computers?

Do these factors explain why relatively new industries are growing explosively and existing industries are being transformed?

us status
US Status
  • In the 1990s the US was the run away leading performer
  • in the industrial world.
  • The US claimed nine of the ten largest companies in the
  • world by 1998 compared to only two in 1990.
  • Nine of the fifteen most profitable banks are in the US
  • compared to none in 1990.
  • The wealthiest man in the world is an American.
  • American billionaires measure in the hundreds.
  • US stock markets remain relatively high.
  • Interest rates are at a forty year low.
  • Inflation has been a minor issue.
some important questions
Some Important Questions
  • Is the relatively unique US prosperity sustainable?
  • Is global integration a boon or a threat to this prosperity?
  • Will the forces that sparked the Asian meltdown provoke an
  • era of stagnation or worse?
  • Should global integration be slowed?
  • What rules should be applied to the creation and protection
  • of new ideas. (intellectual property rights)
  • Can nations create a social system in which entrepreneurial
  • spirit can flourish without also creating income and wealth
  • inequities that threaten the system?
  • What skills are needed to succeed in this new economy?
global international trade
Global (International) Trade

Not in isolation to the rest of the world!

The US has truly become a global economy.

1950 - Global trade represented 10% of the US

economy.

2000 - Global trade was nearly 25% of a much bigger

US economy.

foreign direct investment
Foreign Direct Investment

Since 1985 foreign direct investment in the US has increased five-fold.

Five percent of the total labor force works for companies that are wholly or partially foreign owned.

Employees of companies that work for companies that export earn more than those that do not.

Forty percent of productivity improvements are in exporting companies.

what countries own
What Countries “Own”:
  • Finland
  • Nokia
  • Burger King
  • Chrysler
  • Airbus
  • Benetton
  • Gillette
  • Shell
  • UK
  • Germany
  • France, Spain, UK, Germany
  • Italy
  • US
  • Netherlands
a complex political environment
A Complex Political Environment

Three of five American registered voters approve of free trade.

Most agree that imports give them a larger selection of goods to choose from and that foreign competition forces US companies to be more competitive.

They also feel that imports help lower income families afford a higher standard of living by lowering prices.

They have concerns regarding the environment, human rights, jobs, taxes, societal problems and sovereignty.

trade issue attitudes
Trade Issue Attitudes

Attitudes lie along income, education, age and gender divides.

Free trade proponents tend to be those that see themselves benefiting from globalization: men, those that are better educated, richer and live in cities.

Those who question globalization include women, the elderly, those who are less well educated or poorer and those that live in rural areas.

how trade works
How Trade Works

General Agreement on Tariffs and Trade (GATT)

A loose agreement that had a restricted scope and limited powers based on an agreement that was originally signed in the late 1940s.

World Trade Organization (WTO)

Created in 1995, the WTO has the job of administering trade agreements, resolving trade disputes and conducting future trade negotiations.

slide39
WTO

WTO members must abide by the group’s rulings.

The most important of which is to give every member the same set of low tariffs and other favorable trade rules.

The most significant recent development was the admission of China to the WTO in 2000.

michael porter contributions
Michael Porter Contributions
  • 1985 - Presidential Commission and
  • Competitiveness Definition
  • 1987 - Competitive Model and Value Chain
  • 1990 - Competitiveness of Nations Study
  • Present - Institute for Strategy and Competitiveness,
  • Harvard Business School
slide41

Presidential Commission

Letter to President Reagan

Mr. President, it has been a great honor to serve you and the Nation. The competitive challenge calls for the leadership only you can provide. We thank you for your vision, interest and initiatives in making competitiveness a priority

on our national agenda.

John A. Young

Chairman

President’s Commission

on Industrial Competitiveness

slide42

Competitiveness Definition

The degree to which a nation can, under

free and fair market conditions, produce goods and services that will meet the test of international markets while simultaneously maintaining or expanding the real income of its citizens.

Source: President’s Commission on Industrial Competitiveness

slide43

Competitiveness: A Link to National Goals

Decreased

Budget

Deficit

Stronger

National

Security

Human

Resources

Trade

Policy

Improved

Domestic

Performance

Increased

World Market

Competitiveness

More and

Better Jobs

Capital

Reduced

Trade

Deficit

Increased

Standard of

Living

New

Competition

Technology

Figure 2-1

slide44

Presidential Commission

Recommendations:

1. Create, apply and protect technology.

2. Spur new industries and revive old ones.

3. Pursue productivity gains through technology.

4. Reduce the cost of capital to American industry. Increase the supply of capital available for investment, reduce its cost and improve its ability to flow freely to its most productive uses.

slide45

Who is going to make it happen?

  • Government cannot legislate competitive success.
  • Government should highlight the importance of competitiveness.
  • Everyone must recognize the competitive challenge and its significance.
slide46

How Does a Company Compete?

If the bottom line to a business is

profit, then the top line is value to

customer.

slide47

A Good Optional Strategy?

To produce quality products and

services through effective leadership

of skilled employees using advanced

methods through the innovative use

of technology.

slide48

A Good Competitor:

  • Knows its products and services.
  • Knows its customers.
  • Knows its competitors.
slide49

Competitiveness of Nations

The striking internationalization of competition in the decades after World War II has been accompanied by major shifts in the economic fortunes of nations and their firms.

1. How did this happen?

2. What can one learn from this?

3. What can companies and countries do with this

knowledge?

slide50

Competitiveness of Nations

Why (how) are companies in a particular nation able to gain a dominant competitive position in a specific industry against the world’s best competitors?

slide51

Competitiveness of Nations

The point of all of this:

  • Helps to anticipate from which country future competition is likely to come from?
  • Helps to understand at least in basic terms the types of companies that will be primary competitors?
  • Could help to anticipate what could be their primary competitive strategies?
slide52

Nations do not compete!

Organizations Compete

Within Industries

What is the role of the nation?

previous basis of competitive analysis
Previous Basis of Competitive Analysis
  • Porter Companies and Industries
  • Economists Unit Cost of Labor Adjusted
  • for Inflation
  • Politicians Balance of Payment
  • Companies The Right Strategies to
  • Compete in Global Markets
to understand competitiveness
To Understand Competitiveness
  • The industry was the basic unit of
  • analysis.
  • Industries are organizations that
  • directly compete with each other.
  • Some industries are well-defined,
  • while others are not.
a major message
A Major Message

The role of the nation has increased as competition has shifted more to the creation and assimilation of knowledge.

competitiveness of nations study
Competitiveness of Nations Study
  • Denmark
  • Germany
  • Italy
  • Japan
  • Korea
  • Singapore
  • Sweden
  • Switzerland
  • United Kingdom
  • United States
  • Copenhagen School of Economics
  • Deutsche Bank
  • Ambrosetti Group (transportation company)
  • MITI, Hitotsubashi University and Industrial Bank
  • of Japan
  • Seoul National University
  • Economic Development Board
  • Institute of International Business, Stockholm School
  • of Economics
  • University of Basel, University of St. Gallen, Union
  • Bank of Switzerland
  • The Economist
  • Harvard Business School
slide57

Industry Case Studies

Denmark

Agriculture Machinery

Building Maintenance

Services

Consultancy Engineering

Dairy Products

Food Additives

Furniture

Pharmaceuticals

Specialty Electronics

Telecommunications

Equipment

Waste Treatment

Equipment

Germany

Automobiles

Chemicals

Cutlery

Eyeglass Frames

Harvesting/Threshing

Combines

Optical Instruments

Packaging, Bottling

Equipment

Pens and Pencils

Printing Presses

Rubber, Plastic Working

Machinery

X-ray Equipment

Italy

Ceramic Tiles

Dance Club and Theater

Equipment

Domestic Appliances

Engineering/Construction

Factory Automation

Equipment

Footwear

Packaging and Filling

Equipment

Ski Boots

Wool Fabrics

Japan

Air Conditioning Machinery

Home Audio Equipment

Car Audio Equipment

Carbon Fibers

Continuous Synthetic

Weaves

Facsimile Equipment

Forklift Trucks

Microwave and Satellite

Communications Equip.

Musical Instruments

Optical Elements and

Instruments

Robotics

Semiconductors

Sewing Machines

Shipbuilding

Tires for Trucks and

Buses

Trucks

Typewriters

Videocassette Recorders

Watches

Korea

Apparel

Automobiles

Construction

Footwear

Pianos

Semiconductors

Shipbuilding

Steel

Travel Goods

Video and Audio

Recording Tape

Wigs

Singapore

Airlines

Apparel

Beverages

Ship Repair

Trading

Sweden

Car Carriers

Communication

Products

Environment Control

Equipment

Heavy Trucks

Mining Equipment

Newsprint

Refrigerated Shipping

Rock Drills

Semihard Wood

Flooring

Teller-operated Cash

Dispensers

Switzerland

Banking

Chocolate

Confectionery

Dyestuffs

Fire Protection Equipment

Freight Forwarding

Hearing Aids

Heating Controls

Insurance

Marine Engineers

Paper Product Mfg.

Equipment

Pharmaceuticals

Surveying Equipment

Textile Machinery

Trading

Watches

United States

Advertising

Agricultural Chemicals

Commercial Aircraft

Commercial

Refrigeration and

Air-Conditioning

Computer Software

Construction Equipment

Detergents

Engineering and

Construction

Motion Pictures

Patient Monitoring

Equipment

Syringes

Waste Management

Services

us industries
US Industries

Engineering and

Construction

Motion Pictures

Patient Monitoring

Equipment

Syringes

Waste Management

Services

Advertising

Agricultural Chemicals

Commercial Aircraft

Commercial

Refrigeration and

Air-Conditioning

Computer Software

Construction Equipment

Detergents

slide59

The ways that firms achieve and sustain competitive advantage in global industries provide the necessary foundation for understanding the role of the home nation in the process.

slide60

Diamond of National Advantage

Firm Strategy, Structure and Rivalry

Chance

Factor

Conditions

Demand

Conditions

Related and Supporting Industries

Government

slide61

Competitive Success Is Not the Direct Result of:

  • Natural Resources
  • Labor Pool
  • Interest Rates and Currency Value
  • Economies of Scale

. . . Traditional Economic Thinking

factor conditions
Factor Conditions

The nation’s position in factors of production

that are prerequisites to compete in a specific

industry.

  • Infrastructure
  • People Skills and Training
  • Factors Unique to a Specific Industry

A nation usually does not inherit but creates the most important factors.

factor conditions63
Factor Conditions
  • Physical Resources:
  • Abundance, quality, accessibility and cost of land, water, minerals, timber, hydroelectric power, etc.
  • Climatic conditions.
  • Location and geographic size.
  • Time zone re: global communication.
factor conditions64
Factor Conditions
  • Infrastructure: Type, quality, and user cost.
  • Transportation
  • Communication
  • Mail/freight Delivery
  • Health Care
  • Schools
  • Housing Stock

. . .Quality of life--to live and to work.

factor conditions65
Factor Conditions

Capital Resources: (Amount and cost of

money)

  • Secured Debt
  • Unsecured Debt
  • Equity and Venture Capital
  • Savings Rate
  • Tax Incentives
  • Fiscal and Monetary Policies
factor conditions66
Factor Conditions

Knowledge Resources: Scientific, technical and

market knowledge that pertains to goods and

services.

  • Universities
  • Government Research Facilities
  • Private Research Facilities
  • Business and Scientific Literature
  • Market Research Databases
  • Trade Associations
factor conditions67
Factor Conditions

Human, knowledge and capital factors are mobile.

Other elements of the diamond are more important to explain international success.

therefore
Therefore

Competitive advantage from factor conditions depends on how effectively and efficiently they are mobilized and deployed in the economy.

study conclusion
Study Conclusion

The Japanese created and expanded needed factors at a rate far exceeding that of all other nations.

factor conditions us semiconductor industry
Factor Conditions: US Semiconductor Industry
  • Universities to train engineers and other
  • professional technical employees.
  • Economic space for manufacturing facilities.
  • Good transportation facilities.
  • Good communications system.
  • Access to raw materials.
  • Water.
brazilian chicken industry
Brazilian Chicken Industry
  • Second largest chicken producer after the US.
  • Two large poultry companies: Perdigao and Sadia.
  • Has factor condition advantages:
    • A large domestic market that allows an
    • economy of scale.
    • A large number of farmers to raise chickens.
    • Cheap, abundant corn and soya for feed.
demand conditions
Demand Conditions
  • The sophistication of customer demand.
  • The more demanding the local buyers the better to hone the global competitiveness of home-based companies..
  • The local market provides an early picture of the emergence of buyer needs.
  • This factor is a major positioner for success.
related and supporting industries
Related and Supporting Industries
  • Successful companies need suppliers who are:
  • 1. Home-based.
  • 2. Competitive on an international level.
  • A close relationship with suppliers contributes
  • to innovation and upgrading of products.
  • Prompts a range of interconnected suppliers
  • that are all internationally competitive.
first strategy structure and rivalry
First Strategy, Structure and Rivalry

The way in which companies are

created, managed and choose to

compete domestically.

firm strategy structure and rivalry
Firm Strategy, Structure and Rivalry
  • Study Findings:
  • Company and individual goals vary.
  • No one management style is universally appropriate.
  • Differences in background of CEO and different company structures.
  • Company structures are different.
  • Contrasts in people motivation to work and learn.
  • Career choices of the best students varies.
country examples
Country Examples
  • Germany
  • Italy
  • Japan
slide77

Firm Strategy, Structure and Rivalry

  • Germany
  • The preeminent trading nation when considering the entire postwar period.
  • Have a very international orientation and export early.
  • International success is built on many small and medium sized companies.
  • They compete in highly sophisticated products and segments rather than high-volume ones.
  • The breadth and success of German industries can only be understood in a historical context--achieved over decades.
  • Industry success includes a wide range of industries but Germany does not dominate them as does the U.S. or Japan.
slide78

The economy is extensively clustered.

  • There is wide-spread private ownership.
  • The structure of companies tends to be hierarchical and patriarchal.
  • Managers and workers are well trained in their industries.
  • Pragmatism characterizes German management.
  • Discipline and order is evident in the way that companies are managed.
  • Owners often have a deep involvement in all aspects of the business, especially in technical areas.
  • Managers maintain an enduring relationship with employees.
  • Companies are particularly adept at complex production processes.
  • Selling is technical versus advertising or intangible appeals.
  • Complex product are supported by similar service requirements.
slide79

Achieve high levels of customer loyalty.

  • Labor is very organized and is represented on company boards.
  • New business formulation has traditionally been weak but has changed in the past decade.
  • Most executives have technical or scientific backgrounds.
  • Have a stubborn desire to achieve technical and quality excellence.
  • Invariably compete on the basis of differentiation versus cost.
  • Unrelated diversification is rare.
  • Do not hesitate to invest abroad.
  • Industry is prestigious and attracts outstanding people.
  • The unique strength of the German economy is its capacity to upgrade its advantage by increasing the quality of human and technical resources.
slide80

Germany Share of Total World Exports

  • Bisquettes of Coal, Coke 70.4%
  • Potassium Sulfate 59.4%
  • Reciprocating Pumps 58.1%
  • High Pressure Steel Conduit 55.4%
  • Fresh Milk and Cream 54.5%
  • Rotary Printing Presses 51.1%
  • Iron, High Carbon Steel Coil 49.8%
  • Synthetic Luminophores 47.1%
  • Spinning, Reeling Machines 42.7%
  • Clothes Dryers 41.3%
  • Aircraft over 15,000 kg 38.1%
slide81

Jukeboxes 36.5%

  • Polyvinyl Chloride Plates 35.9%
  • Rubber, Plastics Machines 35.5%
  • Combine Harvester-Threshers 35.3%
  • Packaging, Bottling Equip. 34.1%
  • Sewing Machine Needles 33.2%

Seventeen industries where Germany has 33% or

more of the world’s export market.

slide82

German Companies

BASF AG - Chemicals (1861)

Bayer AG - Chemicals (1863)

Bayerische Motoren Werke AG - Autos, Motorcycles (1913)

Bertelsmann AG - Publishing (1835)

Daimler-Benz AG - Autos and Aerospace (1882)

Henkel KGaA - Detergents and Chemicals (1876)

Hoechst AG - Chemicals (1863)

Friedrich Krupp GmbH - Steel, Engineering, Trading (1587)

Mannesmann AG - Steel Tubes, Auto Parts, Etc. (1885)

Robert Bosch GmbH - Electronic Auto Equipment (1886)

Siemens AG - Electrical and Electronics (1847)

Volkswagen AG - Automobiles (1937)

slide83

Firm Strategy, Structure and Rivalry

  • Italy
  • Joined the ranks of advanced nations in the past two decades.
  • Overall growth in world export share was second only to Japan.
  • Illustrates the power of a growing alignment between national circumstances and the shifting demands of modern global competition.
  • Benefited from a shift from standardized, mass-produced products toward more customized, higher-style, higher-quality goods.
  • In many cases style was combined with investment in state-of-the-art production equipment.
  • Achieved advantage based on segmentation, differentiation and process innovation.
slide84

The world’s leading exporter in textile/apparel, household goods and personal products and third in food and beverages.

  • Are generally not successful where standardization, high-volume mass production, or heavy investments in fundamental research are involved.
  • Companies tend to be highly specialized and compete through constant model changes.
  • Companies tend to be medium to small that compete primarily through export with limited direct foreign investment.
  • Large private firms tend to dominate the home market.
  • Successful industries are highly clustered including geography.
  • Remains a study in contrasts--industry successes and failures.
  • Clearly contradicts its image as a country.
slide85

Companies are often managed by a commanding leader involved

  • in all activities.
  • Below the leader is often fluid, relatively unstructured (chaotic?)
  • operation involving an interpersonal competition that would be
  • rare in Japan.
  • Managers are resourceful improvisers and able to adjust to
  • changes, to circumvent constraints and to adapt to new rules.
  • Most companies are privately owned and owners, managers and workers are closely attached to an industry.
  • Deal with customers on a family-like and personal basis.
  • Business is important and a magnet for talented individuals.
  • Entreprenuership thrives in Italy--they are risk takers who are individualistic and desire independence.
  • These factors lead to a long-term orientation and a commitment to sustained investment.
slide86

Italy Share of Total World Exports

  • Meal and Pellets of Wheat 69.5%
  • Worked Building Stone 62.2%
  • Aperitifs 58.1%
  • Glazed Ceramic Sets 56.6%
  • Precious Metal Jewelry 49.6%
  • Fresh Stone Fruit 45.5%
  • Rubber and Plastic Footwear 41.9%
  • Fabrics of Combed Wool 41.8%
  • Domestic Washing Machines 38.2%
  • Steel High Pressure Conduits 35.9%
  • Sweaters of Synthetic Fibers 34.0%
  • Handbags 33.7%
  • Woolen Sweaters 33.1%
  • Leather Footwear 32.8%

Fourteen industries with one third of world’s export market.

slide87

Italian Companies

  • Fiat SpA - Autos and Farm Equipment (1899)
  • Olivetti - computers and office equipment (1908)
  • IRI Holding Co. (state owned) - 541 companies 5% of GNP
  • Ente Nazionale Idrocarburi - Petroleum & Petrochemical (1953)
  • Perelli SpA - Power Transmission, T/C Cables, Tires (1872)
  • Benetton - clothes manufacturer (1955)
  • Luxotica - frame manufacturers (NY Stock Exchange)
  • Gewiss - electrical fittings
  • Marposs - precision measuring equipment
  • Safilo - frame manufacturers
  • Persol - frame manufacturers
  • Iris - ceramics
slide88

Small Businesses in Italy

(Less than 100 employees)

  • Exemplify flexibility and thrive in niche markets.
  • Provide more than 2/3 of private-sector industrial employment.
  • Escape many of Italy’s oppressive labor laws.
  • Exports increased 20% during a down economy.
  • 99% of Italy’s small businesses are owned by one or two families.
  • To survive Asian competition they concentrate on a higher level of specialization and devote more time to quality and innovation versus price.
  • Many companies were founded following the end of WWII.
slide89

Firm Strategy, Structure and Rivalry

  • Japan
  • Not far behind Germany in becoming a world economic power.
  • Lacked Germany’s historical position.
  • Achieved competitive advantage in some industries and failed in others.
  • The role of the government and management practices does not explain the success of Japanese industries.
  • Has an extraordinarily high share of world exports in many industries with a complete absence of a natural resource intensive industry.
  • There is a unique ability in Japan for the “diamond” to function as a system.
slide90

Possesses a large pool of literate, educated and increasingly skilled human resources.

  • Created and upgraded needed factors that far exceeded that of all other nations.
  • Benefit from a large pool of trained engineers.
  • A technical orientation is pervasive and many managers have
  • engineering backgrounds.
  • Japanese companies are hierarchical and disciplined.
  • Cooperation and subordination are the norm with a unique ability to coordinate across functions.
  • Relationships between labor and management are respectful and strikes are rare.
  • Many of the talented people flow to industry.
slide91

An international outlook promoted by the amount of domestic rivalry is the single biggest explanation for the success of Japanese industries.

  • Japanese companies often define their goals in terms of volume and market share.
  • Strategies often follow a path of standardization and mass production with a major emphasis on quality.
  • Companies relentlessly upgrade their competitive advantage.
  • Ownership of companies is predominantly held in institutions and other companies.
  • Workers define their status on how well the company is doing.
  • Continual learning is emphasized and accepted.
  • More willing to form new companies.
slide92

Japan Share of World Exports

  • Motorcycles 82.0%
  • TV Image and Sound Recorders 80.7%
  • Dictating Machines 71.7%
  • Calculating Machines 69.7%
  • Mounted Optical Elements 67.5%
  • Photo & Thermocopy Apparatus 65.9%
  • Still Cameras and Flash Equip. 62.2%
  • Cash Registers and Accounting
    • Machines 62.0%
  • Outboard Marine Piston Engines 61.0%
  • Electric Gramophones 59.0%
slide93

Microphones, Loudspeakers and Amplifiers 55.7%

  • Motorcycle Parts & Accessories 53.4%
  • Track-Laying Tractors 51.8%
  • Pianos & Musical Instruments 51.0%
  • Self-Propelled Dozers 50.6%
  • Color TV Receivers 49.5%
  • Portable Radio Receivers 48.4%
  • Other Radio Receivers 47.9%
  • Special-Purpose Vessels 46.8%
  • Electric Typewriters 45.0%
  • Steam Boiler Plants & Parts 42.8%
  • Motor Vehicle Radio Receivers 42.5%
  • TV Picture Tubes 42.2%
slide94

Prepared Sound Recording Equipment. 41.5%

  • Photo Chemical Products 41.5%
  • Metalworking Lathes 39.7%
  • Coarse Ceramic Housewares 39.3%
  • New Bus or Truck Tires 39.1%
  • Buses 38.7%
  • Sewing Machines 38.7%
  • Iron, Steel Seamless Tubes 38.7%
  • Self-Propelled Shovels, Excavators 38.4%
  • Computer Peripheral Units 37.9%
  • Lorries and Trucks 37.5%
  • Other Electronic Tubes 36.5%
slide95

Metal Cutting Machine Tools 36.5%

  • Generating Sets with Piston Engine 36.1%
  • Other Cargo Vessels 35.7%
  • Iron, Simple Steel Rolled Plate 35.2%
  • Continuous Synthetic Weaves 34.7%
  • Clocks, Watch Movements 33.8%
  • Rolling Mill Parts and Rolls 33.4%
  • Liquid Dieletic Transformers 33.4%

Forty-three industries with over one third of the

world’s export market share.

slide96

Japanese Companies

  • Honda Motor - Autos and Motorcycles
  • Sony Crop. - Consumer Electronics
  • Bridgestone Corp. - Tires
  • Matsushita Electric - Consumer Electronics
  • Toyota Motor Corp. - Automobiles
  • Nissan Motor Corp. - Automobiles
  • Nomura Securities - Brokerage
  • Hitachi - Computers and Electronics
  • NEC - Computers and Electronics
  • Fujitsu - Computers and Electronics
  • Mitsui Group - Trading and Holding Co.
  • Sumitomo Group - Trading and Holding Co.
  • Mitshubishi Group - Trading and Holding Co.
study postscript
Study Postscript

What happened to Japan since 1990?

1. The second largest economy in the world.

2. Arrogance based on what they had accomplished

including an assumption that the only way their economic

endeavors go is up.

3. A rigidity in approach that takes too long in a fast paced,

global economy.

forget the north pole

Forget the North Pole!

Santa’s Workshop is in China

ironic
Ironic

What makes Christmas festive for Americans is produced in the world’s officially atheistic country whose human rights abuses are deplored by officials of the US government.

What this picture provides is a lesson in globalization and an example of how trade and tradition have brought together China and the US in a mutually beneficial relationship.

imports from china
Imports from China

Based on the first eight months of 2000

Artificial Christmas Trees - $78 million

Christmas Tree Ornaments - $535 million

Christmas Lights - $211 million

Stuffed Toys - $755 million

Dolls - $639 million

Electric Trains - $32 million

Puzzles - $21 million

If not available, over half of this type of merchandise in US stores would disappear.

u s merchandise trade with china 1988 2001
U.S. Merchandise Trade with China: 1988-2001
  • Year U.S. Exports U.S. Imports U.S. Trade Balance
  • 1988 5.0 8.5 -3.5
  • 1989 5.8 12.0 -6.2
  • 1990 4.8 15.2 -10.4
  • 1991 6.3 19.0 -12.7
  • 1992 7.5 25.7 -18.2
  • 1993 8.8 31.5 -22.8
  • 1994 9.3 38.8 -29.5
  • 1995 11.7 45.6 -33.8
  • 1996 12.0 51.5 -39.5
  • 12.8 62.6 -49.7
  • 14.3 71.2 -56.9
  • 13.1 81.8 -68.7
  • 15.0 100.0 -83.8
  • 22.0 102.2 -83.1
it is getting worse
It is getting worse!

2002 -120 billion

2003 40 170 -130 billion

US exports to the rest of the world went down 10% while China’s increased 66%.

Unlike Japan in the past, China has not closed its borders to US imports.

It is the fastest growing export market for US companies.

Meanwhile a number of unfair trade accusations are being thrown around.

china trade barriers
China Trade Barriers

China remains a difficult market to penetrate, due largely to Chinese government policies, which attempt to protect and promote domestic industries.

Goods and services not considered to be high priority, or which compete directly with domestic Chinese firms, often face an extensive array of tariff and non-tariff barriers.

china trade barriers105
China Trade Barriers
  • Tariffs
  • Quotas
  • Non-Tariff Regulations
  • Distribution rights
  • Investment restrictions
competitiveness of nations
Competitiveness of Nations

It is helpful to ask what companies

need to do and where does government

need to play a key role?

role of government
Role of Government
  • Serve as a challenger and catalyst to companies to
  • compete successfully:
  • Focus on specialized factor creation.
  • Avoid intervening in capital factor and currency markets.
  • Enforce strict product, safety and environmental standards.
  • Limit cooperation among industry rivals.
  • Promote goals that lead to sustained investment.
  • Deregulate competitors.
  • Enforce domestic antitrust policies.
  • Reject managed trade.
singapore
Singapore
  • An economic powerhouse.
  • Three million people on a small island.
  • Passed the US in average income in 1999.
  • World’s best infrastructure!?
  • Safe, clean (smoggy).
  • Interesting racial, religious and language mix.
  • Could go from great to awesome.
singapore model
Singapore Model
  • Strong Government (The smartest and most
  • capable should govern)
  • Long Term Planning
  • Foreign Investment
  • Clean Administration
  • Education for All
  • No Welfarism
  • Family Values
  • Law and Order
  • Communal Harmony
kenya
Kenya

From whiskey to cooking fat to batteries to clothes, Kenya is being swamped with counterfeit goods.

Some are made locally but most are imported.

kenya111
Kenya

Focus on the negative impact of counterfeit goods in usually on wealthy nations where products are most often designed and developed.

The effects can be even more devastating in poor and developing countries where profits of any kind are harder to come by, smuggling is more easily accomplished and enforcement is weak or non-existent.

kenya112
Kenya

Kenyan manufacturers are estimated to be losing hundreds of millions of dollars in revenue.

This also costs the government $16 million in annual taxes.

eveready batteries
Eveready Batteries

Employs 350 people in Kenya.

40% of Eveready batteries sold in Kenya are counterfeit.

If this continues, the company will terminate its operation in Kenya.

kenya114
Kenya

80% of counterfeit goods are estimated to come from China.

The business community blames much of their troubles on high costs, such as power and water, and government corruption.

The government run port of Mombasa is notorious for bribery and kick-backs.

kenya115
Kenya

If the business opportunity exists, would you want to do business in Kenya?

slide116

Companies gain an advantage

against competitors by responding

to pressures and challenges.

slide117

The Company Agenda

1. Creating pressure within the company for innovation.

2. Seeking out the best, most successful competitors

3. View as a positive factor the presence of domestic competition.

4. Staying alert to customer, market and competitor trends.

5. Emphasizing the home base as the place to strengthen competitiveness.

6. Selectively pursuing international advantage opportunities.

7. As a company, playing a role in strengthening the national competitive diamond.

:

conclusions
Conclusions
  • Today’s competitive realities demand leadership.
  • Leaders believe in change.
  • They energize their people to innovate continuously.
  • They recognize the need for pressure and challenges to accomplish this.
not everyone agrees
Not Everyone Agrees

Kenichi Ohmae: The Borderless World

The key global economic entity

is the true multinational company.

slide120

Ohmae Contentions

Four factors are usurping economic power

once held by nations:

1. Capital.

2. Corporations.

3. Consumers.

4. Communication.

putting global logic first
Putting Global Logic First

Although political leaders will resist

acknowledging the demise of the nation-

state, only those who can accept it and

promote region-states within and across

their borders will be able to provide the

best quality of life for their constituents.

Kenichi Ohmae

global competitiveness ranking
Global Competitiveness Ranking

Criteria:

1. Quality of national business environment.

2. The set of institutions, market structures and economic

policies supportive of high level of prosperity.

3. Company operations and strategy ranking.

Michael Porter, Institute for Strategy and Competitiveness, Harvard Business School

World Economic Forum web page.

global competitiveness ranking 2002
Global Competitiveness Ranking2002

11. Japan (15)

12. Austria (13)

13. Belgium (14)

14. Australia (9)

15. France (12)

16. Taiwan (21)

17. Iceland (16)

18. Israel (17)

19. Hong Kong (18)

20. Ireland (22)

  • US (2)
  • Finland (1)
  • UK (7)
  • Germany (4)
  • Switzerland (5)
  • Sweden (6)
  • Netherlands (3)
  • Denmark (8)
  • Singapore (10)
  • Canada (11)

21. Norway (19)

22. New Zealand (20)

23. Korea (26)

24. Italy (24)

25. Spain (23)

26. Malaysia (37)

27. Slovenia (32)

28. Hungary (27)

29. South Africa (25)

30. Estonia (28)

global competitiveness ranking124
Global Competitiveness Ranking

33. Brazil (30)

37. India (36)

38. China (47)

48. Poland (42)

55. Mexico (52)

61. Philippines (53)

58. Russia (58)

60. Vietnam (62)

79. Bolivia (75)

80. Haiti

1998 rankings
1998 Rankings

1. Singapore 2.16

2. Hong Kong 1.91

3. US 1.41

4. UK 1.29

5. Canada 1.27

6. Taiwan 1.19

7. Netherlands 1.13

8. Switzerland 1.10

9. Norway 1.09

10. Luxembourg 1.05

11. Ireland 1.05

12. Japan .97

13. New Zealand .84

14. Australia .79

15. Finland .70

16. Denmark .61

17. Malaysia .59

18. Chile .57

19. Korea .39

20. Austria .37

Source: World Economic Forum

major points
Major Points

It is no longer possible for a country to insulate itself from the rest of the world.

The possible decline of the industrialized world is merely the narrowing of the gap between it and third world countries.

The accelerated pace of change is what disturbs the pessimists, because they can see it happening.

It took Britain 60 years to double its output, the US 50 years but developing countries are doubling output every 12 years. China has actually doubled its GDP in seven years.

In many respects the developing world is unknown economic and financial territory.

conclusions127
Conclusions
  • The diamond of national advantage makes sense as a means of understanding global economic success.
  • Domestic success does prepare companies to compete globally.
  • Major European and an increasing number of Asian countries are capable of competing on a global basis.
  • The global marketplace is only going to get tougher based on more, tougher competitors.
  • The diamond can help to anticipate new competitors.