Technology and Global Industry Companies and Nations in the World Economy (1987) / Chapter Skim
Currently Skimming:
International Industries: Fragmentation Versus Globalization
International Industries: Fragmentation Versus Globalization
Pages 96-118
The Chapter Skim interface presents what we've algorithmically identified as the most significant single chunk of text within every page in the chapter.
Select key terms on the right to highlight them within pages of the chapter.
From page 96... ...
Similarity of markets in different counties and intense global competition drove international competitors to coordinate Weir market and competitive strategies between counties more actively. The relevant scope of strategy thus shifted from discrete national markets to global markets, and coordinated worldwide competitive actions between Me various subsidiaries of MNCs became more important.
|
From page 97... ...
Even where economic and technical conditions prohibited such specialization for example, for cement, glass, or ~ndustnal gases competitive actions became coordinated across subsidiaries as We companies realized they were competing in a very concentrated global oligopoly. As a result, portfolio foreign investments, where only intangible assets areleveraged, gave way to strategically coordinated Integrated operations worldwide, exploiting comparative advantages of different countries for venous types of activities.
|
From page 98... ...
This chapter reflects this interest, beginning with a selective review of Me abundant, if still fragmentary, evidence on He trends toward market homoge~zabon, ~ndus~y giob~abon and fit ntegration, and He underlying forces Hat Hive ~em. These issues are discussed at Free complementary levels of aggregation: the mtemadonal economic relations framework; individual industries and Heir compeubve dynamics; and the logistics, organizational structures, and management processes of m~iv~dual firms.
|
From page 99... ...
and Me initial market access cost and delay. More complex, more fragmented, less transparent, and less willing distribution structures would have been a formidable bamer to globalization and, where present, remain a source of asymmetry in giabal~zation (witness the painful efforts of many European and American firms to establish a significant market presence in Japan)
|
From page 100... ...
In some capital goods indusmes, such as papermaking machinery, electncal equipment, and railroad equipment, the cyclicality of domestic demand and the uncertainty of future domestic orders have led to chronic overcapacity and to the need for national finns to diversify their customer base by selling abroad. Intense competition, though, is the key driving force.
|
From page 101... ...
reducing costs Trough Me exploitation of economies of scale or through economies of location; and (2) gaming worldwide market access Trough their own efforts or through networks of partnerships arid coalitions.3 First, many companies attempted to reduce costs by exploiting potential economies of large scale, typically by integrating and rationalizing production in a region (e.g., Philips rationalizing its television tube and receiver plants in Europe and Ford doing the same with cars)
|
From page 102... ...
The primary motive of most partnerships and coalitions is to shore up market presence and technological competence to establish quickly a defensible position in a global industry. While these do provide a viable option, the sharing of strategic condor over compete actions by several partners usually results in tensions as soon as the external technological and market conditions evolve or the relative strategic importance of the jount activities to the venous parmers changes.
|
From page 104... ...
In a world of sequential market development, where new products and new processes were first developed and put to use on the domestic market or in the home plants, home-coun~y R&D made good sense. As foreign markets developed to resemble Be domestic markets, or as foreign plants were built, new products and technologies were transferred abroad once they had been proved domestically.
|
From page 106... ...
Yet, as the home market can no longer be equated win the lead market, century performed R&D needs to be responsive to Be needs of distant potential users. This may be easy to achieve for engineered commodities, such as consumer durables, photocopiers, alla typewriters, but it is more difficult where needs can be defined only In close conjunction until users rawer Han through market research (von Hippel, 1982~.
|
From page 107... ...
The removal of trade barners, and the growing similarity of national markets created He potential for globalization of markets and competition. The development of MNCs, or of global networks allying independent firms, and the technology of cheap effective transportation and communication provided the practical means necessary for the integration of supply.
|
From page 108... ...
Some of the underlying conditions or Wiving forces win have run Weir course, and new Ants may appear. LIMITS TO GLOBALIZATION Manufacturing Technology The evolution of manufacturing technology in particular tile increase in economies of scale In manufacture has been one of the key conditions in favor of market glob~izadon and MNC integration In a number of undus~ies.
|
From page 109... ...
. A widely dispersed integrated manufacturing network (such as Ford of Europe)
|
From page 110... ...
Even web relatively low wages, the product quality provided by automanon In consumer electronics, for instance, may lead to rapidly decreasing labor content and to the repatriation and automadon of plants previously dispersed from developed counties. Locations with low labor costs also tend to catch up with locations with higher costs if ondy because skiDed labor is scarce and the general wage structure moves up.
|
From page 111... ...
What is important here is not so much the exact extent of protectionism, but that recent evolutions do not allow managers to make a safe assumption about freer trade. The risk of a widespread return to protectionism puts a damper on globalization strategies Hat imply high levels of trade and adds fuel to strategies dial return to traditional foreign investment as a way of overcoming trade barriers.
|
From page 112... ...
He threat of more centralization of decision making in MNCs, a process directly related to integration strategies. Canada has clearly articulated concerns about transborder data flows.
|
From page 113... ...
It also makes it difficult for U.S. firms to cooperate with foreign partners on joint R&D and casts doubt on He ability of European firms to use technology they would have acquired Trough collaborative efforts with the United States or wid1 U.S.
|
From page 114... ...
Organizational Capabilities The venous elements discussed above suggest that large mternanonal competitors will face a world of neither fragmentation nor global mtegrabon, but a manure of both, with many shades of gray and complex patterns of international operations that are unlikely to fall neatly into any category. Thus, there will be many trade-offs between industry fragmentabon and globalization and strategies of integration and subsidiary autonomy, and Hey will vary by function, coundy, and business.
|
From page 115... ...
CONCLUSION The Free sets of factors outlined above-manufacturing technology, protectionism, and organizational capabilities may lit He growth of integrated multinational companies and tilt the balance again toward fragmentanon. Collaborative agreements and strategic partnerships may increasingly represent an alternative to direct ~nves~anent for gaining market access, achieving volume production, or leveraging technology.
|
From page 116... ...
Harvard Business School Case Study, DISCS 378-1 IS.
|
From page 117... ...
1982. Transnational Corporations and Transborder Data Flows: A Technical Paper.
|
From page 118... ...
Harvard Business School Wowing Pa - , BS 79-5. van Eppel, E
|
Key Terms
This material may be derived from roughly machine-read images, and so is provided only to facilitate research.
More
information on Chapter Skim is available.