Customer Reviews

How We Compete: What Companies Around the World Are Doing to Make it in Today's Global Economy

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This is a great book that explores globalization. It presents information about offshoring and outsourcing that most people do not hear or think about.

A real page turner, plenty of insight into outsourcing and globalisation, very impressive piece of work!

More than two million jobs disappeared from the U.S. between '01 and '04 - half a million in high-tech industries alone. Further, Steven Roach, chief economist at Morgan Stanley, estimates that there have been about 8 million fewer jobs in the current recovery than would have been expected from prior history, and most of the new jobs come with low wages and few benefits.

Berger knows these numbers have caused a rising fear that no American job is safe from low-wage countries. To discover whether these fears are justified, Berger and a group of MIT researchers visited over 500 workplaces and factories around the world. Their conclusion is that cheap labor is not the answer.

This conclusion is currently true in some instances; however, the authors fail to see that cheap labor (the "China price") is increasingly dominating decision-making - both in services and manufacturing. Jobs that formerly were not candidates for outsourcing (finance, market research, industrial design, computer systems design, paralegal research, reading X-rays) now are; strategies that previously fought off Asian alternatives often fail to work several years later as China and India adopt new techniques; in fact the authors often cite previously highly successful American companies that subsequently succumbed.

G.M. and Ford are additional examples where this may yet happen - despite years of world-leadership. Part of their problem was believing that they could let Japan have the low-cost market - this worked for awhile, but now Toyota et al have applied the lessons learned in that market segment, and leveraged their distribution etc. systems on to producing competitive SUVs and innovative hybrids as well. Meanwhile, Toyota sees Korea and China as its most formidable future challenges, and despite its vaunted Toyota Production System, maintaining direct control throughout all stages (so does Microsoft, but that hasn't kept it from substantial outsourcing to India), and co-locating with suppliers, is seriously looking at China. Remember Visteon and Delphi (Ford and G.M.'s former parts arms)? Spinning them off was supposed to encourage more companies to utilize them, and it worked - for a time. Today's successes are far too often ephemeral!

To be fair, the authors also point out that studies and analyses on the impact of outsourcing reach conclusions all over the map. However, I think the most accurate (and certainly highly credible) conclusion is that of former MIT economist (and Nobel prize-winner) Paul Samuelson - globalization should increase the world's total income and average standard of living, but there's no reason to think any particular country or region's advances will outweigh its losses.

Berger, et al, also go on to recommend substantially improving American education. The "bad news" is that this has been tried for at least 30 years, with little impact. Further, others have determined that Asian IQs average about ten points over that of American whites. Regardless, what difference would improving education make, even if we did achieve equality with Asian outcomes, when the workers are paid but a fraction of Americans?

Berger does mention the rationale for foreign corporations choosing to continue building millions of cars in the U.S. - laws requiring U.S. content. Toyota, Nissan, Mercedes, BMW, Subaru, VW and others have built large plants in the U.S. as a result of this act. However, the authors fail to recognize this as a potentially strong and viable overall solution to the hollowing of America.

Another important omission is the problem of outsourcing large numbers of jobs to illegals within this country - in fact, Berger et al reference a situation involving such as a solution! Estimates are that AT LEAST nine million illegals from Mexico are here - depressing wage levels and stealing jobs that Americans formerly did. And what about the large number of Canadian truck drivers within the U.S. - soon to be augmented by Mexicans. (There are NO American truck drivers in Mexico that I know of, and very few that I've seen in Canada.) Then there is the self-inflicted problem of L1 and H1B visas bringing hundreds of thousands more, albeit legally. While technically not "outsourcing," the impact of each of the preceding is the same.

Another thought from some "experts" is that sending off the lower-level jobs allows the U.S. to focus on "higher level" jobs such as innovation. That's ridiculous for at least two reasons: 1)Manufacturing, for example, involves more than drilling, welding, molding, etc. It also involves design, production management, production layout, machine design, etc. These are NOT low-level jobs, nor is operating highly technical equipment. 2)How are all the displaced workers going to become eg. biomedical researchers, rocket scientists, etc.? (Oh yes, the Chinese and Indians are moving into those areas also; I have encountered a number of Americans who took recommended training in new areas after being "outsourced" from a long-term occupation only to become outsourced again.)

Also missing from "How We Compete" is any discussion and recommendation on healthcare. Auto manufacturers repeatedly claim that having to pay healthcare for their employees adds $1,000+ cost to each car - creating government-funded universal healthcare like other nations would help save jobs in America.

"How We Compete" address an important topic - however, its focus on CURRENT approaches (vs. trends) results in conclusions that are seriously over-optimistic. (Inadequate analysis by Berger and others helps explain the maze of contradictory conclusions on this topic; political and economic motivations of short-sighted clients are additional drivers.) Eight million jobs here, nine million there, etc., etc. - it adds up and hurts a lot. Meanwhile, America's competitive status declines daily and our government does little or nothing in defense.

In the boom years of mass consumption after WWII, the vertically integrated companies flexed all their muscles. Giants like RCA, IBM, Levi Strauss, and Volkswagen coordinated all the functions from research and development to distribution within their own control in the company. "For the first time in history, a great number of complex manufactured goods, like automobiles, refrigerators, canned foods, bicycles, and radio and television sets, became affordable for people with ordinary earnings."

In this book, they attempt to report on what the team learned about constraints and strategic choices in the global enonomy. "As far as I know, this is the first large-scale analysis of globalization that starts with a view from the trenches -- the people under great pressure to respond to new challenges in hundreds of companies around the world." If all manufacturing leaves America, can research, design, and services be far behind?

Firms locate production abroad or contract out to foreign manufacturers to get the cheap labor. It doesn't matter that the quality is poor and not up to standard. "Finding workers at lower wages is the main concern." Who makes Dell computers and where? The December 19, 2004, 'New York Times' article quoted Kevin Rollins as saying that "Dell makes them in the United States." They even moved a production group to Nashville, Tennessee. "None is outsourced; none is made in other countries and shipped in." It has been pointed out that Dell laptops are assembled abroad." In 2005, 'Fortune' named Dell "America's most admired company." Ms. Berger maintains that "the only operation that take place in Dell factories in the United States are those involved with final assembly -- in other words, screwing in the parts and burning in the software options selected by the customer" and that Dell outsources all the manufacturing of the components which are included in its computers.

Lenova Group Ltd. may be the world's third-largest computer maker after acquiring IBM's personal computer business, but it's a household name only in China. It provided an Internet cafe in the Olympic Village at Torino with free access to thirty-four computers for email service for the athletes and trainers. NBC's Olympic crew leased 1,000 Lenova notebook and desktop computers. Because of this exposure and the expensive sponsorship, its aim is recognition as a worldwide brand.

Global trade has railroads humming again. The right train of thought can take you to a better station in life. Norfolk Southern is leading the way. As manufacturing moved abroad, more finished goods needed to crisscross the country from ports. In the 20th century, train engines, railroad cars, and thousands of miles of railroad tracks were all Norfolk Southern needed to reach prosperity. With the assistance of University of Tennessee as a key management tool to a broader understanding of the global logistics economy, Norfolk Southern is now more integrated in the global supply chain.

Many of their trains are reassembled at the John Sevier Yard where my dad worked in the Fifties for the Southern Railway. Norfolk Southern who bought them out operates in twenty-two states and Canada, employing 30,000 people with Knoxville as a key hub because of its location and the CSX local Railroad. Sourcing of parts and materials is more global not only on a 21,000 mile cross-country route, but the Asian products headed to the Midwest will use Eastern ports like Norfolk, Virginia.

At present, six major U. S. ports including Miami, Florida, are being used by Arab Emirates businesses which merged with a subsidiary of a London-based firm purchased by Durai Ports Wrold for $6.8 billion to allow direct access to American soil. Medicare is already substituting generic medicines manufactured in Israel and Germany in its new drug "insurance" whereby the American patient has no say in the matter. And it is not free! Competing globally for manufactured goods is one thing but putting the American population, especially the fragile elderly, at risk for chemical warfare -- or national security -- is another matter.

Previously, I reviewed Thomas Friedman's THE WORLD IS FLAT which this author takes a differing opinion. She says that he claims "talented individuals from all over the world are now competing on a level playing field." She advocates that our world is still round. When MIT came out with another study, "Made in America" in 1988, "we learned about senior corporate delegations making visit after visit to Japanese plants to fathom the secrets of Japanese success." The Toyota and Nissan plants were built in Smyrna, Tennessee, and Lexington, Kentucky, and Detroit lost some of its automobile production to Spring Hill, Tennessee. Now, the digital companies have decided on Middle Tennessee to relocate.

This is a five-year study by a dozen (nine men, three women) MIT Industrial Performance Center Globalization Team of which the author was a member. She teaches political science at MIT and was also in the group which produced the earlier study, "Made in America." Established in 1991, the IPC is headed by Richard K. Lester. There is a group picture on page 335 of the illustrious group which has now decided "How We Compete." I say, we don't!