Advantages of Companies and Countries
Advantages of Companies and Countries
Company and country advantages depend, of course, on the particular products, services, and resources that they can provide. In addition, one may look at comparative opportunities by size of company, location of production facilities, and some particular operating characteristics.
Among the so-called Triad Powers (the United States, Japan, and Western Europe), Western Europe would seem to have a location advantage in trade with Eastern Europe and the Soviet Union as markets open. Furthermore, it is probable that preferential trading relationships will develop between the European Community and various Eastern European countries. Japan has a similar location advantage with China and is already the largest exporter to China. In addition, Chinese industrial purchasers rate the quality of Japanese products higher than those from the United States and higher than those from any European country except Germany.62 U.S. production has a location advantage only with Cuba, and that market has a much smaller potential than the ones in Eastern Europe and China.
If we look at operating forms other than export-import, then the location situation is less important. U.S. firms have the greatest experience in operating plants of the size needed for the amount of output required by large Russian and Chinese markets. The U.S. is the leader in franchising. Given shortages of funds within HPEs for large operations, franchising may be an effective way to tap into HPE entrepreneurial partnerships where smaller amounts of capital are needed. Furthermore, franchising provides an upgrading of skills for local owner-managers who participate in training programs and receive operating manuals. For example, AlfaGraphics is successfully franchising printing shops in Russia, where local private individuals have sufficient resources and motivation to invest their own funds.63 The United States also has large numbers of first- and second-generation residents from HPEs who are influential, who know a great deal about HPE markets, and who have emotional ties that could be used to develop HPE business ties.
There are several areas in which U.S. and CIS interests are complementary. One of these could involve more research collaboration, since CIS firms are strong in basic technology but weak in applying that technology to new products, an area in which U.S. firms are strong. Another is the combination of vast CIS natural resources with U.S. firms' ability to manage extraction in large projects. Still another is the CIS strength in transporting goods over long distances, which could be complemented by U.S. abilities to market such goods.
Western European firms made more earlier inroads into Eastern Europe than firms from the United States and Japan, and they show a greater willingness to invest in that area than firms from either Japan or the United States. However, their positions in China are not nearly as well developed. Because of location once again, Japan may look more to Southeast Asia and the United States to Latin America as future sources of labor-intensive components. Western European firms, however, may look more at Eastern European HPEs.
Perhaps Japan's biggest advantage is the usual willingness of Japanese managers and companies to adopt a long-term strategy. Japanese companies may, therefore, be more willing to wait as long as it takes before remitting profits and capital from their HPE endeavors. A second factor that may benefit Japanese firms is that they have less of a presence within the European Community than Western European or U.S. firms and are now targeting the EC for expansion. They therefore will not have to worry so much about the sunk cost of present facilities if they serve the EC through Eastern European production units.
Regardless of where companies are located, large firms will undoubtedly have an advantage in undertaking very large-scale HPE projects because of experience, the needed capital inputs, and the high fixed costs associated with long-term negotiations. However, smaller firms may serve as subcontractors, even on these projects. Furthermore, smaller firms may have some other advantages in the future. Their size may be more compatible with that of small private HPE enterprises that wish to develop trade or joint venture relationships with Western firms. Furthermore, smaller firms may be more flexible in their operations. For example, before McDonald's opened in Moscow, a U.S. entrepreneur with few financial resources began operating a Nathan's Famous Hot Dogs mobile unit there. From one pushcart he serves about 1000 customers a day and is very profitable. To assure supplies, he buys meat each day from the Central Market, where farmers sell from their private production at as much as seven times the price in state stores. But this way, he always has supplies. He is able to be much more flexible than a larger operation, such as McDonald's. For example, he buys whatever meat is available for the hot dogs—beef, rabbit, bear, wild boar.64 Flexibility may thus be the key to success for small Western firms wishing to tap new HPE opportunities.
Company and country advantages depend, of course, on the particular products, services, and resources that they can provide. In addition, one may look at comparative opportunities by size of company, location of production facilities, and some particular operating characteristics.
Among the so-called Triad Powers (the United States, Japan, and Western Europe), Western Europe would seem to have a location advantage in trade with Eastern Europe and the Soviet Union as markets open. Furthermore, it is probable that preferential trading relationships will develop between the European Community and various Eastern European countries. Japan has a similar location advantage with China and is already the largest exporter to China. In addition, Chinese industrial purchasers rate the quality of Japanese products higher than those from the United States and higher than those from any European country except Germany.62 U.S. production has a location advantage only with Cuba, and that market has a much smaller potential than the ones in Eastern Europe and China.
If we look at operating forms other than export-import, then the location situation is less important. U.S. firms have the greatest experience in operating plants of the size needed for the amount of output required by large Russian and Chinese markets. The U.S. is the leader in franchising. Given shortages of funds within HPEs for large operations, franchising may be an effective way to tap into HPE entrepreneurial partnerships where smaller amounts of capital are needed. Furthermore, franchising provides an upgrading of skills for local owner-managers who participate in training programs and receive operating manuals. For example, AlfaGraphics is successfully franchising printing shops in Russia, where local private individuals have sufficient resources and motivation to invest their own funds.63 The United States also has large numbers of first- and second-generation residents from HPEs who are influential, who know a great deal about HPE markets, and who have emotional ties that could be used to develop HPE business ties.
There are several areas in which U.S. and CIS interests are complementary. One of these could involve more research collaboration, since CIS firms are strong in basic technology but weak in applying that technology to new products, an area in which U.S. firms are strong. Another is the combination of vast CIS natural resources with U.S. firms' ability to manage extraction in large projects. Still another is the CIS strength in transporting goods over long distances, which could be complemented by U.S. abilities to market such goods.
Western European firms made more earlier inroads into Eastern Europe than firms from the United States and Japan, and they show a greater willingness to invest in that area than firms from either Japan or the United States. However, their positions in China are not nearly as well developed. Because of location once again, Japan may look more to Southeast Asia and the United States to Latin America as future sources of labor-intensive components. Western European firms, however, may look more at Eastern European HPEs.
Perhaps Japan's biggest advantage is the usual willingness of Japanese managers and companies to adopt a long-term strategy. Japanese companies may, therefore, be more willing to wait as long as it takes before remitting profits and capital from their HPE endeavors. A second factor that may benefit Japanese firms is that they have less of a presence within the European Community than Western European or U.S. firms and are now targeting the EC for expansion. They therefore will not have to worry so much about the sunk cost of present facilities if they serve the EC through Eastern European production units.
Regardless of where companies are located, large firms will undoubtedly have an advantage in undertaking very large-scale HPE projects because of experience, the needed capital inputs, and the high fixed costs associated with long-term negotiations. However, smaller firms may serve as subcontractors, even on these projects. Furthermore, smaller firms may have some other advantages in the future. Their size may be more compatible with that of small private HPE enterprises that wish to develop trade or joint venture relationships with Western firms. Furthermore, smaller firms may be more flexible in their operations. For example, before McDonald's opened in Moscow, a U.S. entrepreneur with few financial resources began operating a Nathan's Famous Hot Dogs mobile unit there. From one pushcart he serves about 1000 customers a day and is very profitable. To assure supplies, he buys meat each day from the Central Market, where farmers sell from their private production at as much as seven times the price in state stores. But this way, he always has supplies. He is able to be much more flexible than a larger operation, such as McDonald's. For example, he buys whatever meat is available for the hot dogs—beef, rabbit, bear, wild boar.64 Flexibility may thus be the key to success for small Western firms wishing to tap new HPE opportunities.
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