Chapter Discussion

Explain why international competition has increased among the United States, Japan, the EU, and Asian nations.
World competition has intensified, and there are four nations and groups of nations whose firms are in worldwide competition with each other—the United States, Japan, the EU, and the NIEs and other Asian nations. Nations do not compete with each other; their firms do—but most economic and social conditions, as well as political actions, affect the ability of all a nation’s firms to compete. Using the term national competitiveness is a convenience.

Know the areas in which the United States remains vulnerable to foreign competition.
The United States may be vulnerable due to a variety of factors, including declining investment in research and development, particularly by the government; a shortage of knowledge workers and low U.S. test scores at the secondary level; regulatory and legal requirements and the rising costs of compliance; inadequate tax reform, market-opening efforts, and protection of intellectual property rights; and a rising trade deficit and dependence on foreign capital.

Describe the responsibilities of government, management, labor, and consumers in maintaining the international competitiveness of the United States.
Government must reduce the stifling government bureaucracy that hampers business, hemp improve the nation’s education system, reduce the double taxation of dividends, and adopt a capital gains tax to encourage investment in modern technology. Management must take a long-term view in planning and should increase its investment in R&D, employee training, and plant and equipment.

Explain the competitive environment in Japan, the EU, and the developing nations, including the NIEs.
It appears that both the Japanese and the EU countries are losing some of their competitiveness compared to the United States. Critics say Europe’s competitiveness problems stem in part from the fact the European workers are overpaid and overprotected and get too many holidays, all of which raise Europe’s labor costs. The expensive yen, high labor costs, and inefficient management practices are causing Japanese industry to lose its competitiveness. The developing nations and the NIEs are still recovering from the Asian economic crisis of 1997.

Understand the purpose of the keiretsu in Japanese industry.
A keiretsu is a group of financially connected Japanese firms that tend to do business among themselves. Two of the most important forms of keiretsu are the vertically integrated production group found in all Japanese automakers and the horizontal group that is a family-owned conglomerate. American businesspeople and government trade officials claim that the keiretsu system acts as a barrier to American producers trying to sell to Japanese companies. Slow domestic growth, deregulation, the opening of financial markets to international competition, and pressures for reform of corporate governance are loosening traditional keiretsu relationships.

Appreciate the magnitude and danger of product counterfeiting.
Product counterfeiting is costing industry worldwide as much as $200 billion, some experts claim. It is especially common in Asia. American producers of software, compact discs, and videos allege they are losing millions of dollars in sales annually to pirated copies produced in China.

Understand the importance of industrial espionage.
Industrial espionage is costing American firms billions annually in lost sales. General Motors accused is former global head of purchasing of sabotage when he and associates left the firm to join Volkswagen. He allegedly stole company secrets about a new small car that are said to be worth billions to Volkswagen in product development time saved. There are many reports of the French secret police spying on foreign industrialists. American and European competitors think that the gains the French are making in high-tech fields are due to information stolen by French industrial spies.

Describe the sources of competitive information.
Sources of competitive information are from within the firm, published material, customers, competitors’ employees, and direct observation.