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Angela Farmer Melinda Lobaugh Patat Ayuwathana Chris Fishback.

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Presentation on theme: "Angela Farmer Melinda Lobaugh Patat Ayuwathana Chris Fishback."— Presentation transcript:

1 Angela Farmer Melinda Lobaugh Patat Ayuwathana Chris Fishback

2  Different varieties of capitalism are shown throughout the world.  Post-war West Germany: Coordinated market economy  America: Liberal market economy  We need to understand what has lead to different factions of capitalism throughout the world.

3  Changing conditions determine strategy- effectiveness.  “Fordist Model”: low-cost production, price-based competition.  Large firms removing barriers, small firms reducing trust in coordinated districts could destroy economic viability.  Changes in the business environment are likely to affect conditions for different competition models.

4  It’s important to understand the context of given markets to gauge the effectiveness of capitalistic strategies.  Post-war competition models  Socio-economic conditions  Impact of institutional, market, and tech changes

5  Seven ideal types of competition models  Each reflects the priorities firms adopt in changing markets.  Different conditions seem likely to encourage firms to follow particular types  Summary of market changes since the 60’s that have influenced business system restructuring.

6  Institutions governing the economy encourage companies to form idealized combinations of specific trade-offs when they are competing in a particular market economy.  Purpose: develop organization-specific competitive advantages

7 1. Production volume 2. Competition 3. Response to market changes

8  Large economies of scale v. customization  Low prices v. high quality  Responding quickly to changing demand v. reducing costs by limiting changes to production processes and products

9  Mass markets dominated by large oligopolistic enterprises and mass production  Dedicated technologies and routines  Standardized products using unskilled labor  Relies on large and predictable market demand  Low prices

10  Advantages:  Ability to design and control production processes  Systematically utilize and coordinate capabilities to gain large economies of scale  Consistently reduce costs Large market share through low prices  Producer driven production system  Disadvantages:  High barriers for entry and exit  Not as flexible in response to change

11  Ability to quickly shift production between product lines and adapt to changing demands  Competes on price and fast responsiveness to customer demand  Key focus: entrepreneurial  seize new opportunities and manage semi-skilled labor  Does NOT involve developing new products

12  Small-batch production with highly skilled workers  Large customization and focus on ability to respond to demand changes  Response to changes may be slow  limits the degree of work restructuring in the short- run

13  Small production volume of customized goods AND faster market responsiveness  Highly skilled staff working together to produce specialized services  Innovation is key for growth  Easily coordinate and develop new knowledge and skills  Variation in outputs and not bound by certified skills

14  Large production volume of differentiated goods + high quality and responsiveness to customer demands  German firms in 1970’s:  Micro-electronic control devices  Lower breakeven point of mass production  Combine small batch of customized goods with large-batch of basic components

15  Enhancing organizational capabilities  Quicker response to market change than DQP model  Restructure production and implement technical changes into developing new products  Rapid development and commercialization of new products (R&D)  Core competence: cross-functional project team

16  Inventing disruptive technologies that change the market and threaten dominant firms  New skills are distinctive and inevitably destroy the current dominant firms  Competence: fast responsiveness to new scientific and technological knowledge and opportunities  Innovation  develop  manufacturing new products  dominate current market OR create new market

17 Six key conditions  Product market size and differentiation  Constraints on short term economic opportunism  Availability of knowledgeable risk capital  Supply of technical specialists  Availability of new technical knowledge  Ease of Modularizing the value chain and disintegrating production process

18  Mass production/undifferentiated  Few legal restrictions on employers hiring and firing  Highly routinized and easy to carry out jobs  Take advantage of their size in negotiating with their suppliers  Important roles of Technical specialists and managers

19  Large, price/fashion focused  Lower cost, simpler products production  Access and efficient management of easily trained and low-cost labor  Harder access to technical specialist compare to Fordism

20  Niche, quality focused  There must be barrier that prevent large firms from using predatory pricing  Practitioner elites control access to their services and the certifications  Collective competition goods, i.e. Sakaki township  Have to maintain high wages, challenging jobs, and access to training

21  Niche, quality focused  Combining and enhancing skills and expert knowledge  Enhance current and create new competencies  Depends on employee’s commitment  Required a large supply of certified specialists

22  Large, differentiated, and quality focused  Short term opportunistic behaviors are restricted  Employers and workers are encouraged develop broad skills and ability to learn new knowledge  Encourage trust and commitment between major group involved  DQP replaced Fordism in many of the richer market economies during the last third of the twentieth century

23  Large, differentiated, and quality focused  Ability to translate new knowledge into new products or services  Extensive investment in engineers and managers  Relies on high level of organizational commitment and cross-functional collaboration  Weak occupational identities, organization- specific career paths

24  Large, price and/or quality focused  Flexible labor markets  Strong and knowledgeable venture capital companies  Environment that supports the development of innovative technologies  Winner takes all market

25 Conditions Fordis m Opportunist ic Craft Flexible customize d productio n Diversified quality production Flexible MPDG Discontinuo us innovation Product Market size and differentiatio n Mass, undiffer - entiate d Large, price/fashio n focused Niche, quality focuse d Large, differentiat ed, quality focused Large, price/quality focused Constraints on short term opportunism Low HighMedHigh Low Availability of knowledgeab le risk capital Low High Supply of technical specialists HighLow High Availability of new technical knowledge Low Med High Modularizati on MedHighLowMedLowHigh

26  Reason: ◦ Changing interest groups coalitions ◦ Reduction of controls over competitive behavior in and entry into markets 1. Internationalization of product markets, capital markets, and managerial coordination of economic activities 2. Changes in geo-political regimes 3. Changes in information and communication technologies 4. Extensive periods of economic growth 5. National governments have invested in the expansion of education systems

27  Reduce national institutional constraints on opportunism  Reduce cohesion of national interest groups supporting them  Quality based competitive strategies and integrate supply chains ◦ Follow DQP logics  Reduce domestic diversification and focus on delivering specified outputs ◦ ICT innovations help

28  Reduced ability to coordinate activities  Limit opportunism within national borders  Seek to improve investment fund performance and limit labor unions  Migrated or negated by restrictions on shareholder powers, variations in shareholders’ voting rights, limitations on hostile takeovers, and the capacity to mobilize opposition to foreign investors  Increasing access to well-informed venture capital

29  Enhanced conditions supporting Fordist strategies  MNC able to access low cost labor and variable integration with national and regional governance arrangements  Able to opt out of local associations, collective agreements, and other processes that restrain short-term economic opportunism  Reduced cohesion and effectiveness of regional and national institutions

30  Enlarged markets for many goods and services  Increased availability of unskilled and low- cost labor for MNC  Weakened the power of labor unions organizing lower skilled workers

31  Reducing the cost of communicating over long distances and enhanced codification of knowledge and data  Driving international economic integration ◦ Firms communicate more effectively with suppliers and customers across large distances  Increase the mutual dependence and integration of customers and suppliers  Risk sharing and mutual trust

32 1. Improve the flow of codified knowledge ◦ Reduces employee process information ◦ Facilitating managerial control over work processes ◦ Reduce coordination costs and speed up product development and production ◦ Increase flexibility of production lines  Smaller batches and cheaper product changeover 2. Enhance skilled workers’ abilities and integrate planning and execution activities – Enables faster responses to market and technical changes – Greater employee involvement in problem solving and business development activities

33  Easier to adapt to new technologies and work processes without needing detailed supervision  Limit the degree of managerial direction of task performance  Facilitate competitive strategies based on radical, discontinuous innovations

34  Fordism and Opportunism  Int’l expansion of mass markets  Increasing the ease of coordination thru ICT  Fordism has declined on a national level, but is thriving internationally.  In many service sectors, changes have encouraged internationalization and standardization of service provision.

35  Opportunistic encouragement  Internationalization  Use of ICT (coordination)  However, ease of entry to many buyer-driven commodity chains mean a constant threat from competitors of low-cost economies.

36  Large firms using ICT severely threatens small firms emphasizing local markets.  Italy: moved SMEs to low-cost countries (China)  China has moved to Italy (made in Italy)  By upgrading technical knowledge, more competencies are offered than just one craft.  Denmark

37  That method also enables companies to extend their services by dealing with new problems and concerns of their customers.  Many flexible project teams  This depends greatly on low-cost training.  Denmark has been supported by social protection that enables workers to experiment with new ways of working.

38  Flexible competition models are encouraged by:  Enlarging number of potential customers for specialized goods/services  Expanding supply of highly educated workers to acquire new technical skills  Using ICT to coordinate skills/activities both within and across national boundaries.  Internationalization grows the market  Increase a company’s niche  Allows them to access staff from different labor markets.

39  Advantage to internationalization  Locating production facilities in larger foreign markets/lower labor cost countries produces greater revenue.  Coordination of managerial procedures with domestic operations, companies can combine DQP with lower costs. (especially where ICT innovations facilitate cross-national integration)  Companies that employ these strategies should benefit from internationalization.

40  The combination of the following has supported the development of discontinuous innovation competition models.  Internationalizing product/capital markets  Expanding higher education/public science systems and income growth  ICT innovations

41  A few points  1. Most of the changes considered here vary in their expected impact on firms’ priorities depending on current competition models/institutional contexts.  Some threaten quality-based models.  Many offer opportunities.

42  2. Identification of national institutional regimes with a single dominant economic logic is weakening with greater internationalization.  Many competition models involve cross-border economic coordination.

43  3. The combination of internationalization, increasingly differentiated patterns of demand, and an increased rate of product innovation is encouraging many firms to respond rapidly to changing circumstances.  Adaptability is critical.

44  4. How firms respond to such pressures and opportunities still seems to be strongly affected by their domestic environment and its conditioning of priorities/capabilities.  While US companies embrace outsourcing, Japan prefers to maintain centrality in design, development, and manufacturing.  In the early 2000s, Japan outsourced routine things while retaining their established patterns of collaboration at home.

45  While changing environments offer potential opportunities and threats, how leaders respond is influenced by their established capabilities and the context in which they are utilized.

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