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!?.
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!
Business and Information Systems Management Challenges
*Must understand the Business and
Enterprise Environment first*
New Political Agendas
and New Values
“The global market will come to you, if you don’t come to it.”
Going to be taking a look at competition, defining it and then focusing on global competition.
“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
The way companies achieve competitive
advantage in the global industry is based on
the role played by the home nation.
Firm Strategy, Structure and Rivalry
Related and Supporting Industries
“All good things take time.”
Business Competitive Environment
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.
in the 21st Century
Why the emphasis on globalization and the importance of global competition?
The global market will come to
you, if you don’t go to it.
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?
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
2000 - Global trade was nearly 25% of a much bigger
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.
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.
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.
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.
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.
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
on Industrial 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.
Source: President’s Commission on Industrial Competitiveness
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.
If the bottom line to a business is
profit, then the top line is value to
To produce quality products and
services through effective leadership
of skilled employees using advanced
methods through the innovative use
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
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?
The point of all of this:
What is the role of the nation?
The role of the nation has increased as competition has shifted more to the creation and assimilation of knowledge.
Pens and Pencils
Rubber, Plastic Working
Dance Club and Theater
Packaging and Filling
Air Conditioning Machinery
Home Audio Equipment
Car Audio Equipment
Microwave and Satellite
Optical Elements and
Tires for Trucks and
Video and Audio
Fire Protection Equipment
Paper Product Mfg.
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.
Firm Strategy, Structure and Rivalry
Related and Supporting Industries
. . . Traditional Economic Thinking
The nation’s position in factors of production
that are prerequisites to compete in a specific
A nation usually does not inherit but creates the most important factors.
. . .Quality of life--to live and to work.
Capital Resources: (Amount and cost of
Knowledge Resources: Scientific, technical and
market knowledge that pertains to goods and
Human, knowledge and capital factors are mobile.
Other elements of the diamond are more important to explain international success.
Competitive advantage from factor conditions depends on how effectively and efficiently they are mobilized and deployed in the economy.
The Japanese created and expanded needed factors at a rate far exceeding that of all other nations.
The way in which companies are
created, managed and choose to
Seventeen industries where Germany has 33% or
more of the world’s export market.
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)
The world’s leading exporter in textile/apparel, household goods and personal products and third in food and beverages.
Fourteen industries with one third of world’s export market.
(Less than 100 employees)
Possesses a large pool of literate, educated and increasingly skilled human resources.
An international outlook promoted by the amount of domestic rivalry is the single biggest explanation for the success of Japanese industries.
Forty-three industries with over one third of the
world’s export market share.
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,
Santa’s Workshop is in China
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.
Because of 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.
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 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.
It is helpful to ask what companies
need to do and where does government
need to play a key role?
From whiskey to cooking fat to batteries to clothes, Kenya is being swamped with counterfeit goods.
Some are made locally but most are imported.
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.
Kenyan manufacturers are estimated to be losing hundreds of millions of dollars in revenue.
This also costs the government $16 million in annual taxes.
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.
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.
If the business opportunity exists, would you want to do business in Kenya?
against competitors by responding
to pressures and challenges.
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.
Kenichi Ohmae: The Borderless World
The key global economic entity
is the true multinational company.
Four factors are usurping economic power
once held by nations:
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.
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.
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)
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)
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)
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
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.