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Book Presentation

How We Compete by Suzanne Berger

Book Abstract

MAIN IDEA

To separate fact from fiction when it comes to the impact of globalization on businesses, the MIT Industrial Performance Center analyzed the real-world experiences of more than 500 international companies over a five-year period. They found the overall impact of globalization is not quite as one-dimensional as generally accepted thinking suggests. Instead of simply sending all jobs to low-wage countries, globalization is also generating a world of opportunities at the same time as it also generates significant dangers for established corporations. More and more, it is becoming apparent it is the strategy which an organization employs which means the difference between success and failure, not the external forces of globalization themselves.

This study also concluded that contrary to what the press usually portrays, cheap labor is not the answer to every business challenge. There are many different ways to succeed in the global economy. The avenues which are open to established companies to excel are actually far more numerous and richer than is generally thought. The process of globalization produces a large number of different potential routes to success, not just the one which has gained the most publicity thus far.

All in all, when it comes to globalization, there is no single correct answer. Everyone has to figure out their own best way forward from the universe of choices which are available.

Globalization is not something that just happened but the product of millions of choices: choices made by corporations about what to do within the four walls of a company, choices about what to buy from others, and choices about where to locate all these activities. Globalization means a world of opportunity and a world of danger. Surveys in the United States and Europe find very mixed opinions about globalization, often reflecting those conflicting opinions within individuals themselves, rather than simply the rifts between supporters and opponents of globalization. A majority of Americans and Europeans think globalization raises their standard of living: a majority also believe that it is bad for employment and job security. For the question about who wins and who loses in the new global economy and the uncertainties about whether the opportunities are worth the risks, there is no one right answer. The pressures of globalization force virtually all economic actors to transform their activities but they do not dictate a single best way to do it. Even in electronics, with its great advances in codification and modularity, we found a real diversity of successful approaches to decisions about outsourcing and peeling off manufacturing, showing that alternative approaches to globalization are possible. We question whether globalization inevitably condemns any particular commercial activity at all.

Suzanne Berger

About the Author

SUZANNE BERGER is a professor of political science at the Massachusetts Institute of Technology (MIT). She is also a director of the MIT International Science and Technology Initiative. Dr. Berger has been teaching at MIT since 1968. She is a graduate of the University of Chicago and Harvard University. Dr. Berger was a member of the MIT Commission on Industrial Productivity which analyzed the weaknesses and strengths of U.S. industries in the 1980s. Dr. Berger was co-author of the commissions report, Made in America.

The Web site for this book is at www.howwecompete.com.

Important Note About This Ebook

This is a summary and not a critique or a review of the book. It does not offer judgment or opinion on the content of the book. This summary may not be organized chapter-wise but is an overview of the main ideas, viewpoints and arguments from the book as a whole. This means that the organization of this summary is not a representation of the book.

Summary of How We Compete (Suzanne Berger)

1. Defining the term globalization

Although almost everyone is thinking about and talking about globalization, the term itself does not have an exact or formal definition. Globalization has been used since the 1990s to describe the combined effect of deregulation and the lowering of trade restrictions. Perhaps the first step in reconciling all the contradictory claims about globalization would be to come up with a standard definition everyone can agree upon rather than using globalization as generic term to describe any major change in society.

The core idea of globalization is the emergence of a single world market for labor, capital, goods and services. In this idealized marketplace:

• Equal wages for the same work would be paid, regardless of where the worker is physically located.
• The market price of a good or service would be identical, regardless of where it was purchased.
• Interest rates would be the same around the world, being adjusted upwards or downwards only to allow for different levels of risk.

Clearly, the world is far from such a situation and major economic upheaval is occurring as the world moves closer to this ideal. With this in mind, some people have suggested a better real-world definition of globalization is: The acceleration of the processes in the international economy and in domestic economies that operate toward unifying world markets.

Although scholars may not yet agree completely on how to define globalization, it is generally accepted globalization is the product of a series of diverse political, economic and technological events:

• China opening up its borders to trade with the West in 1979.
• The fall of the Berlin wall in 1989.
• Political decisions by the United States and other major world economic powers to liberalize capital markets and to remove trade restrictions, notably the 1947 General Agreement on Tarriffs and Trade and the 1986-1994 Uruguay Round of negotiations from 1986 to 1994.
• The decision to establish the World Trade Organization in 1994.
• The ongoing reduction in the costs of communication and transportation, fueled by new technologies.
• The liberalization of national financial markets including the unrestricted and unregulated ability to move large amounts of capital into and out of countries at will.

What scares many companies most about globalization is the fact it makes it feasible for firms of all sizes and shapes to access resources from anywhere in the world and incorporate them into products sold in established markets in new ways. These resources can include:

• Low-cost skilled or semi-skilled workforces.
• State-of-the-art manufacturing facilities.
• Skilled technicians who are innovative and experienced.
• Access to cutting-edge innovation and problem solving skills.
• The ability to rapidly scale up production without making large up-front capital investments.
• Shortened time-to-market and a compressed product development cycle.
• Ready-to-use modules and components which can be combined to make new products.
• Access to specialist firms who are world-class in their manufacturing techniques and operations.
• On-demand production capacity and other professional services, including marketing.

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