Management Strategies that Make U.S. Firms Competitive in the Global Economy

Ted Reingold

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000526554
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

First Published in 1998. Between the years 1981-1992 U.S. companies were forced to compete in a global economy. This book identifies U.S. industries and companies that were competitive during that period and highlights the management strategies and practices they used to compete successfully in the international marketplace. The basis for the results in this book came from the utilization of United Nations data available in its International Trade Statistics Yearbooks (1980-1994).

CHAPTER 1 Introduction to Competitiveness

DOI: 10.4324/9781003249580-1

Since the rise of the Hapsburg Empire in the 1500s, the stature of nations ill western civilization has been determined by their economic strength and stability, primarily because a country’s economy served as the underpinning of its military power. During most of the twentieth century, the U.S. used its financial strength as a basis of its military power to dominate the world order.¹ However, advances in technology after 1970 helped reduce the importance of military strength and even contributed to the dismantling of the Soviet Union, thus greatly reducing the major military threat to the U.S. and its allies. More importantly, the technology revolution of the last 25 years has made the global economy more dynamic and important than ever before: industrial competitiveness in the world market is an important political and economic factor in determining a country’s overall stature on the planet. During the period 1970-1990, as the global economic climate shifted, U.S. industrial competitiveness declined. Many of its industries lost global market share (See Table 1, Chapter 2), and its trade and budget deficits have grown (See Tables 4 and 5, Chapter 3).

Studies, by the Department of Commerce,² Scott and Lodge,³ and Lenz,⁴ have documented this decline of U.S. competitiveness and analyzed the factors contributing to it. These studies, which focused on Standard International Trade Classification (SITC) and Standard Industrial Classification (SIC) coded industries as a whole, did not seek to identify individual companies within competitive industries, nor did they analyze management practices and policies to determine their effect on competitiveness.

This book identifies U.S.-based industries that were competitive during the period 1981-1992. The United Nations International Trade Statistics Yearbooks were used to determine the dollar value of exports and imports and the global market share of all U.S. 3-digit SITC manufacturing industries during the period 1980-1992. This information was then used to select 3-digit SITC manufacturing industries which increased their global market share during that period. Most data of U.S.-based companies is compiled using SIC codes; therefore, the competitive 3-digit SITC industries were converted to 4-digit SIC codes using a conversion program produced by the National Trade Data Bank. The three largest companies (by sales) within each competitive 4-digit SIC code are identified and the management practices and policies of these companies are analyzed in an attempt to determine factors that have made them competitive.

IMPACT OF TECHNOLOGY ON ECONOMIC AND MILITARY POWER

Advances in technology during the second half of the twentieth century severed the relationship between military strength, economic power, and world dominance. The development of nuclear weapons during the later stages of World War II and the technological advances that increased the destructive power of these weapons during the 1950s made these weapons both all powerful and powerless.⁵ The potency of nuclear arms made it probable that their use would destroy the world as we know it. By the late 1960s, a nation’s ability to develop a first strike capability seemed beyond reach. The proponents of the Star Wars System, which would create a defensive shield against nuclear attack, appeared to recognize the futility of achieving a first strike capability and supported a system that would give the U.S. military superiority through defense.

TECHNOLOGY CONTRIBUTES TO FALL OF THE SOVIET UNION

Ultimately, an inadequate economic structure was unable to maintain the powerful military and political system of the Soviet Union. However, due to the threat of the U.S.S.R. through the 1980s, military power was a primary factor in determining the overall strength of the U.S. Through numerous military alliances, the U.S. was the protector of the advanced economies of Western Europe and Asia. As the 80s ended, it became evident that despite the importance of military power. economic strength was becoming a major factor in determining a country’s overall position. With technologies such as satellites, fax machines, and copiers, Soviet and Eastern European citizens were able to learn of the prosperity in the advanced European and Asian countries. The discontent fostered by this knowledge, coupled with the inability of Communist leaders to prevent their citizens from seeing, listening, and reading about uprisings in other Soviet Bloc nations, hastened the dismantling of the Communist system in Europe. Such changes have had both political and economic implications. As noted by Theodore Levitt, technology has

Proletarianized communication, transport, and travel. It has made isolated places and impoverished peoples eager for modernity’s allurements. Almost everyone everywhere wants all the things that they have heard about, seen or experienced via the new teclumologies.⁶

With the fall of the Soviet Union and Communist Eastern Europe, industrial European and Asian countries were freed from relying on the U.S. military. Economic factors became the primary focus in determining a nation’s relative strength.

U.S. LOSES COMPETITIVE ADVANTAGE

The globalization of wants and needs resulting from advanced technologies has been reflected by growth in international trade. This growth has been caused in part by the standardization and worldwide proliferation of many products that were believed to be restricted by local or national culture.

As an indication that our economy is moving away from self-sufficiency, total U.S. exports have grown faster than the economy as a whole over the past twenty-five years, and in 1990 export expansion provided one-half of total U.S. economic growth.⁷

imports are three times as high a share of national income as they were a generation ago. Total exports of goods and services have increased from $296.7 million in 1982 to $539.4 million in 1991 or by 81.8% and total imports of goods and services during the same period have increased from $807.1 million to $1,513.3 million or by 57. 5%.⁸

Exports of principle end use commodities increased by 94.8% from 1982 -1991 while imports of principle end commodities grew by 96.6% during this saine period. Standardization in industries such as autos, steel, pharmaceuticals, consumer electronics, toys, soft drinks, and fast food has made international markets critical to the current and future success of U.S. firms.

Multinational corporations were 50% more likely to survive the 1980s than domestic corporations. Profits as measured by the average pretax return on assets for multinational finns from 1986-1990, was 9% compared with 7% for domestic finns. Average profits for multinationals were higher than those of their domestic counterparts in 16 of the 20 two-digit SIC industry groups.⁹

As export sales are increasing, many U.S. firms are implementing concentric growth strategies that focus on international markets. Coca-Cola, Toys `12 Us, PepsiCo, IBM, and Phillip Morris are examples of companies in diverse markets that are looking to the international arena for growth opportunities. As U.S. exports and imports have grown, the U.S. has become as dependent on international trade as Western Europe and Japan.

If you look at total trade—exports plus imports of goods and services as a share of GNP—you will find that those shares are virtually identical for the U.S., Japan and the European community taken as a group. The U.S. is now as dependent on the world economy as tiny insular Japan. That represents a stunning transformation from the situation just a couple of decades ago. In fact over the past two decades, America’s dependence on the world economy has more than doubled while Japan’s and Europe’s have stayed about the same.¹⁰

Emerging technologies have changed the nature of comparative advantage; this reduction of advantage for the U.S. is a critical factor that has helped create the ^-near equality of the three economic super powers, the United States, Japan and an economically uniting Europe.”¹¹ Since its inception, the U.S. has used its natural resources to increase its economic strength by focusing on high volume industries that served a relatively insulated domestic market.¹² Comparative advantage is no longer static and based on endowed natural resources, but is dynamic and can be created by policies that develop capital and technologies that enhance business opportunities.¹³ Technological advances have reduced transportation and raw material costs and forced U.S. industries to compete on a basis of high value, not high volume. High value businesses effectively utilize human capital to create markets and products that solve problems.¹⁴

Many studies indicate that European and Asian business firms have, as a whole, been more capable of implementing business strategies and developing management practices that meet the requirements of high value enterprise. These studies note that the strategies of core competencies,¹⁵ strategic intent,¹⁶ and megamarketing¹⁷ coupled with management practices of total quality management and Deming’s “Concept of Quality Control”¹⁸ have allowed many foreign based firms to gain a significant market share for their products in the U.S.¹⁹

CONSEQUENCES OF DECLINING U.S. ECONOMIC STRENGTH

The lessening of U.S. economic strength in the twenty-five years following World War II is considered natural by a consensus of economists and government and business leaders.

In 1950 U.S. GNP amounted to 1/3 of the total world output. By 1970 the strong growth abroad had reduced this share to some 22% of world GNP, a 35% decline. During the same period, the U.S. share of world exports declined from 21% to 18%, a proportionate drop of only 14%. The United States thus maintained its status in world trade more strongly than would be indicated by the relative size of the economy alone. Further in absolute terms, the United States has remained the world’s largest single trader. In 1970, U.S. exports exceeded those of the 2nd largest exporter, Germany by 25%_..²⁰

The continued decline in U.S. economic strength from 1970-1990 is the primary cause of the disruption in the relationship established between business, labor, and government during the later stages of the depression of the 1930s. The modern relationship between government, business, and labor developed during the Roosevelt Administration. After World War II, this coalition was able to increase production of goods and services by implementing policies and strategies that limited risk and created a stable financial structure.²¹

Under this coalition, government was responsible for economic and social outcomes. With the support of business, the government used monetary and f...

Table of contents

• Cover Page
• Half Title Page
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• TABLES
• FIGURES
• PREFACE
• Chapter 1 Introduction to Competitiveness
• Chapter 2 Competitiveness: Definition and Measurement
• Chapter 3 The Effect of Public Sector Policies on Competitiveness
• Chapter 4 The Effect of Management Policies on Global Competitiveness
• Chapter 5 Identifying Competitive U.S.-Based Industries & Companies
• Chapter 6 Management Policies that Make Companies Competitive
• Chapter 7 Public and Private Sector Policy Implications
• Epilogue
• Bibliography
• Index