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Dec 15, 2015
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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!
ATP AssignmentsATP Assignments
Djurovic, Michael Agilent
Tekle, Michael Agilent
Braff, Sam Apple Computer
Javaid, Raheed Cisco
Levchenko, Steven Cisco
Martin, Brandi Cisco
Stefanek, Tera Cisco
Vissell, Mira Cisco
Hanson, Nathan Dell
Lalonde, Eric Dell
Lau, Simon Dell
Rosander, Emily Dell
Ward, Devon Dell
Corona, Allen Intel
Lee, Vitaliy Intel
Li, Xuemei Intel
Lin, Victoria Intel
Patel, Hemal Intel
Poblete, Andrew Intel
Mathur, Navneet Oracle
Watt, Elizabeth Oracle
Wong, Cindy Oracle
Bains, Satender Sun Microsystems
Shusta, Alexander Sun Microsystems
ATP Assignments
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 FactorsKey Factors1. Industry definition.
2. “Big Picture” data regarding the industry.
3. Business and IT leaders.
4. Porter Competitive Model analysis.
5. Business Strategy Model.
6. Identifying strengths and weaknesses of the company.
7. Figuring out who runs the business on a day-to-day basis and the relationship with the person running the IS organization.
8. Concluding what the company changed through the use of Information Systems.
Chapter 1 SummaryChapter 1 Summary
Business and Information
Systems Management Challenges
Overview of Chapter 1Overview of Chapter 1
Three Necessary PerspectivesThree Necessary Perspectives Simultaneous Revolutions in the Business Simultaneous Revolutions in the Business
EnvironmentEnvironment Systematic Approach to ISSystematic Approach to IS Three Roles of ISThree Roles of IS
Three Necessary PerspectivesThree Necessary Perspectives
•Business Environment Specific Industry
•Enterprise EnvironmentThe Company Itself
•IT EnvironmentCreates a Competitive Advantage*Must understand the Business andEnterprise Environment first*
Business Success
Simultaneous RevolutionsSimultaneous Revolutions
The Business
NewCompetitors
New Political Agendas
New Technologies
New Employeesand New Values
Increasing Customer Expectation
New Rulesof Competition
Industry StructureChanges
New RegulatoryEnvironment
Systematic Approach to ISSystematic Approach to IS
VisionStrategyTactics
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 IS 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 PerspectivesThree Necessary Perspectives
– Business / Enterprise / Information TechnologyBusiness / Enterprise / Information Technology
Simultaneous Revolutions Simultaneous Revolutions – Competitors / Rules / Structure / Regulatory / Customer Competitors / Rules / Structure / Regulatory / Customer
Expectation / Employees / Technology / PoliticsExpectation / Employees / Technology / Politics
Systematic Approach to ISSystematic Approach to IS– Separate Business from ITSeparate Business from IT
Three Roles of ISThree Roles of IS– EfficiencyEfficiency
– EffectivenessEffectiveness
– Competitive AdvantageCompetitive Advantage
Chapter 1 QuestionsChapter 1 Questions
Why is it important to know the business Why is it important to know the business environment and enterprise environment environment and enterprise environment before addressing the IT environment?before addressing the IT environment?
Identify and explain the three roles of Identify and explain the three roles of Information Systems including a specific Information Systems including a specific company example that emphasizes each of company example that emphasizes each of the roles?the roles?
Chapter 2Chapter 2
Business Competitive Business Competitive EnvironmentEnvironment
“The global market will come to you, if you don’t come to it.”
Competition Can Be…Competition Can Be…
LocalLocal RegionalRegional NationalNational InternationalInternational
Going to be taking a look at competition, defining it and then focusing on global
competition.
Why Do We Care?Why Do We Care?
What Is Competitiveness?What Is Competitiveness?
““The degree to which a nation can, under free and fair market The degree to which a nation can, under free and fair market conditions. Produce goods and services that will meet the test conditions. Produce goods and services that will meet the test of international markets while simultaneously maintaining or of international markets while simultaneously maintaining or expanding the real income of its citizens”expanding the real income of its citizens”
Three Inputs to improving domestic performanceThree Inputs to improving domestic performance Human ResourcesHuman Resources CapitalCapital TechnologyTechnology
Competitiveness: A Link to National Goals
HumanResources
Capital
Technology
ImprovedDomestic
Performance
More andBetter Jobs
IncreasedStandard of
Living
StrongerNational Security
DecreasedBudgetDeficit
TradePolicy
NewCompetition
Increased World Market Competitiveness
ReducedTrade Deficit
Figure 2-1
How does a company gain a How does a company gain a competitive advantage?competitive advantage?
Provide a value to customersProvide a value to customers– RealReal– PerceivedPerceived
• Knowing/Understanding
- Products
- Customers
- Competitors
International Competitive AdvantageInternational Competitive Advantage
The way companies achieve competitive The way companies achieve competitive
advantage in the global industry is based on advantage in the global industry is based on
the role played by the home nation. the role played by the home nation.
The Diamond National AdvantageThe Diamond National Advantage
Firm Strategy, Structure and
Rivalry
Factor
Conditions
Demand
Conditions
Related and Supporting Industries
Chance
Government
Fig. 2-2
The Government’s RoleThe Government’s Role
CatalystCatalyst
ChallengerChallenger
OverviewOverview
What competitiveness is.What competitiveness is. How a company can gain competitive How a company can gain competitive
advantage.advantage. How to gain an international competitive How to gain an international competitive
advantageadvantage The government’s role in fostering home-based The government’s role in fostering home-based
companies.companies.
““All good things take time.”All good things take time.”
Chapter 2Chapter 2
Business Competitive Business Competitive EnvironmentEnvironment
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.
Position Some Important FactorsPosition Some Important Factors
Competitiveness is the Pivotal Business Issue
in the 21st Century
Global EconomyGlobal Economy
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.
Business EnvironmentBusiness Environment
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 StatusUS Status• In the 1990s the US was the run away leading performer in the industrial world.
• Interest rates are at a forty year low.
• Inflation has been a minor issue.
• 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.
Some Important QuestionsSome 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)
• What skills are needed to succeed in this new economy?
• Can nations create a social system in which entrepreneurial spirit can flourish without also creating income and wealth inequities that threaten the system?
Global (International) TradeGlobal (International) Trade
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.
Not in isolation to the rest of the world!
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”:
• Nokia
• Burger King
• Chrysler
• Airbus
• Benetton
• Gillette
• Shell
• Finland
• UK • Germany • France, Spain, UK, Germany • Italy • US • Netherlands
A Complex Political EnvironmentA 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 AttitudesTrade 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 WorksHow 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.
WTOWTO
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
Presidential CommissionLetter 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. YoungChairmanPresident’s Commissionon Industrial Competitiveness
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
Competitiveness: A Link to National Goals
HumanResources
Capital
Technology
ImprovedDomestic
Performance
More andBetter Jobs
IncreasedStandard of
Living
StrongerNational Security
DecreasedBudgetDeficit
TradePolicy
NewCompetition
Increased World Market Competitiveness
ReducedTrade Deficit
Figure 2-1
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.
Who is going to make it happen?
1. Government cannot legislate competitive success.
2. Government should highlight the importance of competitiveness.
3. Everyone must recognize the competitive challenge and its significance.
How Does a Company Compete?
If the bottom line to a business is
profit, then the top line is value to
customer.
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.
A Good Competitor:
1. Knows its products and services.
2. Knows its customers.
3. Knows its competitors.
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?
3. What can companies and countries do with this knowledge?
2. What can one learn from this?
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?
Competitiveness of Nations
• 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?
The point of all of this:
Organizations Compete
Within Industries
What is the role of the nation?
Nations do not compete!
• 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
Previous Basis of Competitive AnalysisPrevious Basis of Competitive Analysis
• 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.
To Understand CompetitivenessTo Understand Competitiveness
The role of the nation has increased as competition has
shifted more to the creation and assimilation of knowledge.
A Major MessageA Major Message
Competitiveness of Nations StudyCompetitiveness of Nations Study1. Denmark
2. Germany
3. Italy
4. Japan
5. Korea
6. Singapore
7. Sweden
8. Switzerland
9. United Kingdom
10. 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
• University of Basel, University of St. Gallen, Union
Bank of Switzerland
• The Economist
• Harvard Business School
• Institute of International Business, Stockholm School
of Economics
Industry Case StudiesIndustry Case Studies DenmarkAgriculture Machinery
Building Maintenance
Services
Consultancy Engineering
Dairy Products
Food Additives
Furniture
Pharmaceuticals
Specialty Electronics
Telecommunications
Equipment
Waste Treatment
Equipment
GermanyAutomobiles
Chemicals
Cutlery
Eyeglass Frames
Harvesting/Threshing
Combines
Optical Instruments
Packaging, Bottling
Equipment
Pens and Pencils
Printing Presses
Rubber, Plastic Working MachineryX-ray Equipment
ItalyCeramic TilesDance Club and Theater EquipmentDomestic AppliancesEngineering/ConstructionFactory Automation EquipmentFootwearPackaging and Filling EquipmentSki BootsWool Fabrics JapanAir Conditioning MachineryHome Audio EquipmentCar Audio EquipmentCarbon FibersContinuous Synthetic WeavesFacsimile EquipmentForklift TrucksMicrowave and Satellite Communications Equip.Musical InstrumentsOptical Elements and Instruments
RoboticsSemiconductorsSewing MachinesShipbuildingTires for Trucks and BusesTrucksTypewritersVideocassette RecordersWatches
KoreaApparelAutomobilesConstructionFootwearPianosSemiconductorsShipbuildingSteelTravel GoodsVideo and Audio Recording TapeWigs
SingaporeAirlinesApparelBeveragesShip RepairTrading
SwedenCar CarriersCommunication ProductsEnvironment Control EquipmentHeavy TrucksMining EquipmentNewsprintRefrigerated ShippingRock DrillsSemihard Wood FlooringTeller-operated Cash Dispensers
SwitzerlandBankingChocolateConfectioneryDyestuffsFire Protection EquipmentFreight ForwardingHearing AidsHeating ControlsInsuranceMarine EngineersPaper Product Mfg. EquipmentPharmaceuticalsSurveying Equipment
Textile MachineryTradingWatches
United StatesAdvertisingAgricultural ChemicalsCommercial AircraftCommercial Refrigeration and Air-ConditioningComputer SoftwareConstruction EquipmentDetergentsEngineering and ConstructionMotion PicturesPatient Monitoring EquipmentSyringesWaste Management Services
US IndustriesUS Industries
AdvertisingAgricultural ChemicalsCommercial AircraftCommercial Refrigeration and Air-ConditioningComputer SoftwareConstruction EquipmentDetergents
Engineering and ConstructionMotion PicturesPatient Monitoring EquipmentSyringesWaste Management Services
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
Factor
ConditionsDemand
Conditions
Related and Supporting Industries
Diamond of National Advantage
Chance
Government
• Natural Resources
• Labor Pool
• Interest Rates and Currency Value
• Economies of Scale
Competitive Success Is Not the Direct Result of:
. . . Traditional Economic Thinking
The nation’s position in factors of productionthat are prerequisites to compete in a specificindustry.
• Infrastructure• People Skills and Training• Factors Unique to a Specific Industry
A nation usually does not inherit but creates the most important factors.
Factor ConditionsFactor 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 ConditionsFactor 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 ConditionsFactor 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 ConditionsFactor 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 ConditionsFactor Conditions
Human, knowledge and capital factors are mobile.
Other elements of the diamond are more important to explain international success.
Factor ConditionsFactor Conditions
Competitive advantage from factor conditions depends on how effectively and efficiently they are mobilized and deployed in the economy.
ThereforeTherefore
The Japanese created and expanded needed factors at a rate far exceeding that of all other nations.
Study ConclusionStudy Conclusion
Factor Conditions: Factor Conditions: US Semiconductor IndustryUS 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 IndustryBrazilian 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.
• 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.
Demand ConditionsDemand Conditions
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.
Related and Supporting Related and Supporting IndustriesIndustries
The way in which companies are
created, managed and choose to
compete domestically.
First Strategy, Structure and First Strategy, Structure and RivalryRivalry
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.
Firm Strategy, Structure and RivalryFirm Strategy, Structure and Rivalry
Country ExamplesCountry Examples
• Germany
• Italy
• Japan
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.
• 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.
• 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.
Germany Share of Total World ExportsGermany 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%
•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.
German CompaniesGerman CompaniesBASF 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)
Firm Strategy, Structure and RivalryFirm Strategy, Structure and RivalryItaly• 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.
• 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.
• 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.
Italy Share of Total World ExportsItaly 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.
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
Small Businesses in Italy
• 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.
(Less than 100 employees)
Firm Strategy, Structure and RivalryJapan• 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.
• 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.
• 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.
Japan Share of World ExportsJapan 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
Machines62.0%
• Outboard Marine Piston Engines 61.0%
• Electric Gramophones 59.0%
• 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%
•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%
•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 theworld’s export market share.
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 PostscriptStudy Postscript
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.
What happened to Japan since 1990?
Forget the North Pole!Forget the North Pole!
Santa’s Workshop is in ChinaSanta’s Workshop is in China
IronicIronic
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.
Minimal Inflation in the US?Minimal Inflation in the US?
Because of China!
Imports from ChinaImports from ChinaBased 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: 1988-2001U.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 -6.21990 4.8 15.2 -10.41991 6.3 19.0 -12.71992 7.5 25.7 -18.21993 8.8 31.5 -22.81994 9.3 38.8 -29.51995 11.7 45.6 -33.81996 12.0 51.5 -39.51997 12.8 62.6 -49.71998 14.3 71.2 -56.91999 13.1 81.8 -68.72000 15.0 100.0 -83.82001 22.0 102.2 -83.1
It is getting worse!It is getting worse!20022002 -120 billion -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 BarriersChina 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 BarriersChina Trade Barriers
• Tariffs
• Quotas
• Non-Tariff Regulations
• Distribution rights
• Investment restrictions
It is helpful to ask what companies need to do and where does government need to play a key role?
Competitiveness of NationsCompetitiveness of Nations
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.
Role of GovernmentRole of Government
SingaporeSingapore
• 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 ModelSingapore 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
KenyaKenya
From whiskey to cooking fat to batteries to clothes, Kenya is being swamped with counterfeit goods.
Some are made locally but most are imported.
KenyaKenya
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.
KenyaKenya
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 BatteriesEveready 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.
KenyaKenya
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.
KenyaKenya
If the business opportunity exists, would you want to do business in Kenya?
Companies gain an advantage against competitors by responding to pressures and challenges.
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.
:
• 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.
ConclusionsConclusions
Kenichi Ohmae: The Borderless World
The key global economic entityis the true multinational company.
Not Everyone AgreesNot Everyone Agrees
Ohmae Contentions
Four factors are usurping economic power
once held by nations:
1. Capital.
2. Corporations.
3. Consumers.
4. Communication.
Although political leaders will resistacknowledging the demise of the nation-state, only those who can accept it andpromote region-states within and acrosstheir borders will be able to provide thebest quality of life for their constituents.
Kenichi Ohmae
Putting Global Logic FirstPutting Global Logic First
Global Competitiveness RankingGlobal Competitiveness RankingCriteria:
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 RankingGlobal Competitiveness Ranking20022002
1. US (2)
2. Finland (1)
3. UK (7)
4. Germany (4)
5. Switzerland (5)
6. Sweden (6)
7. Netherlands (3)
8. Denmark (8)
9. Singapore (10)
10. Canada (11)
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)
Global Competitiveness RankingGlobal 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 Rankings1998 Rankings1. 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 .37Source: World Economic Forum
Major PointsMajor 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.
ConclusionsConclusions
• 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.
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