Modern Business in Comparative Perspective - Essay Example

MODERN BUSINESS IN COMPARATIVE PERSPECTIVE: A CASE OF CHINA, UK, US, JAPAN AND GERMANY Introduction The essay will focus on the national and international functions and competitions in the modern-day international economy. The comparative analysis of the big economies of the globe such as China, US, Japan, UK and Germany are taken into consideration. The role of origin and their historical perspectives in shaping the business processes, both internally and externally, will be examined. The comparative perspectives in a global context and its transformation with time along with the response of various economies are elucidated. The different indicators along with the Porter’s 5 Forces model would be used to develop comparative aspects of business in terms of various major economies (Hattori, 2000). The Comparative Analysis of Various Businesses: Theories and Concepts The economic, socio-political, legal, human resource norms and related industrial support decides the course of business internally, for a certain economy. Comparative analysis of the business can be done from a perspective across various economies such as UK, China, US, Japan and Germany from industrial, social and legal point of view. As a part of Operations management, the analysis and synthesis of the workflow can be further classified by the various approaches taken by various businesses. Taylorism, Toyotism and Fordism are few operation management theories that discuss the various operation management schemes in the global market. Taylorism F.W. Taylor gave Taylorism or the scientific organization of work. The horizontal division of work based upon productivity of each individual is the key to such a model. One of the first forms of scientific management, Taylorism is based out of productivity of manpower at work and efficiency reached with better use of process and equipments. The mechanization and automation based production has increased the efficiency of the manpower. Today the practice is best used for the manpower intensive work processes to measure the individual productivity and efficiency. Fordism Based upon the principles laid down by of Henry Ford, the Fordism is a production related operations management theory. It is depended upon mass consumption and changing working conditions for industries in mass production. The production theory is based upon lower cost goods use in its production and pay its employees wages enough to buy them. The method is a model of economic expansion and technological progress by standardizing manufacturing of product in huge volume with low skill labours and suitable technology. Hence, the standardization of product is achieved with machinery use with least manpower skill interventions. The process uses special purpose tools permitting low skilled workers with wages to sustain a ‘good life style’. The production management technique is adopted in process based industries like Automobile. Toyotaism Toyotaism or lean manufacturing theory of production was developed by Toyota, a system designed to provide tool for people to develop their work outputs. The Toyota Way thus concentrates upon the principle of just in time and the minimal stock with 5 zero based advantages. Zero breakdown, zero defects, zero paper, zero delay, zero inventory are the key to this model but organizations have failed to implement such structures due to the fact that the consumers steer the demand and are unpredictable to a large extend. The smoothness of the job by steadily reducing the process unevenness improving the production and reducing wastage is the view of Toyotaism (Hbs.org, 2012). The Porter’s 5 Forces model suggests that a business grooms its internal processes in accordance with the existing market situations (Humphries, 2006). The different factors that affect business externally such as supplier’s bargaining power, consumer’s power to purchase, substitutions the consumers may choose from and the threats of the new entrants are the forces that have direct correlation with the business. Therefore depending upon the market’s external situations, the business develops its strategies to sustain and grow. Economic Perspective: The economic perspective for any economy is the determinant of international competiveness that it carries. Manufacturing of goods or business would need inputs such as infrastructure, raw materials and consumer’s purchase power to sustain in any economy. The retail prices of goods are set in the international market in quality and offering perspectives and not upon the cost of manufacturing due to the competitive market structures (Rassool, 2004). The Porter’s Competitive Advantage of nations has 4 elements in its folds such as firm structure, rivalry, demand conditions, related industrial supporting industries (Barnes, 2007). These competitive advantages have two critical external influences as Government and situation in terms of international market conditions. International Trade norms facilitate and regulate the exchange of goods and services between economies without many hindrances (Parisot, 2014). Therefore the economy for a nation is dependent on the gross annual domestic production and provides a great source of revenue for the nation by exporting the excess of its domestic production to other nations (Ahuja, 2000). The exchange may either bring in foreign currency or get the economy some other goods that it has deficit. Therefore, the economy that can sustain its domestic consumption and further create an excess to be sold outside the nation, in other economies for an exchange of goods or currency, is a strong economy (Salvatore, 2004). Again, a economy is said to be strong which have technical capabilities and resources to sustain and manufacture best quality at a price which fits the consumer’s choices globally. Nations like US, UK, China, Japan and Germany have one thing in common. They can address their domestic consumptions and have excess to export, in a variety of goods from different sectors. One example is the Middle Eastern Arab nations that have high production of crude oil while the agro production is near to null due to arid and dry climatic conditions. Economies sustaining itself and creating enough leverage to benefit others by exporting, is prone to have a better GDP. Again the failure of a strong internal consumer’s bargaining power or a forward looking economy of structure can reduce the competitiveness of an economy. Hence, in China the external demands caters to the operations management structures internally, creating a lower competitiveness of the economy. Porter (1990) suggested that the exchange rates, economy of scale, partnerships, collaboration are few elements that determines the competitive success of an economy on a international scale, as the operations are dependent upon them. China has good productivity but the home-grown demands for goods do not exist, making it a good producer with a back end operations management infrastructure determining productivity. Political Perspectives: The government’s role in assisting the business for further growth and development are distinctly observed in the ways the legislations are developed. The other political perspectives are the ease of entry into a market and competency of the equation between the economic and political sources of business and government. The nations like Japan, US, Germany are capitalist nations and have an open market system allowing the foreign players to sell in their domestic markets. China on the other hand has a Communist government that has imposed strict entry barriers for international trade goods in their markets (Roesler, and Willmot, 1991). Nevertheless, China has taken the advantage of having open market in the capitalist nations to capture the market share while its domestic markets remains closed for non-Chinese businesses. Furthermore, the political situation also determines the product or services that an economy would like to have and create barriers for other businesses from entry. Therefore the cultural and social aspects in governance, those govern the internal production processes and skill development determines the national markets. China is a communist nation where the business and its productions are governed by the state. The Capital markets on the other hand, are open to competency and value outputs. The investments are open for private investors in Capitalist nations where government plays a supporting role as trade and economy facilitator. Strategic skill development (Schools and Universities) along with legislative support to manage environment friendly manufacturing processes are few of the government regulated activities in free market economy (Bates, 2010). In China however, the Businesses are entirely state owned and controlled along with their skill development initiatives. The state controls the import and exports of domestic production in each step (Gali and Gertler, 2009). Hence the competence in the Chinese markets is guided by International demands and is entirely dependent upon international market dominance with cheap goods. Human Capital resources: The manpower skill sets required by an economy is dependent upon the technologies and raw materials available with the business. In the stringent market conditions of today, the key to a producer’s sustainability are the skill sets and technology determining the competitive pricing it can offer. The Chinese skill development mechanisms are not similar to that of Japan, US or Germany. The job and labour quality in China is guided by the state policy encompassing tasks at hand, labour prices, working conditions etc, those are completely different in German or Japanese context (Pratoom, 2010). The skill and its prices are negotiated by the employer in an open economy where the Government works as a social institute and authority to fix the minimum wages and other such mandatory working conditions. However, Chinese market has an abundance of cheap labour with poor working conditions where the job market is not parallel to that of a business of UK or Japan. The labours in the later economies are more skilled and aware of their rights and responsibilities, than in China. The Communist regime of China rules over the State with the intent of manufacturing for International markets. However, the international level of competitive labour market and technology dependent manufacturing is by far still to come in China (Stern, 1988). The production is manpower oriented and operations management lacks the competitive skill of other economies making the labour market less technology oriented. In the aforesaid context, the Porter’s 5 Forces model determines the way the businesses and industries are operating in a nation or economy along with advantages and strategic outcomes they can create for themselves (Vapola et al. 2010). However, the Chinese market is significantly different to its counterparts like Germany, Japan, UK and US. The various nations and its outlook on the aforesaid context are as below: United States: The nation is considered as the benchmark economy while measuring another economy in a global perspective. The GDP (Gross Domestic Production) of the US represents 22.4% of the entire Global Nominal GDP making it the largest Economy worldwide. The basic industries those are prominent in the nation’s GDP other than food grain production would be petroleum, steel, motor vehicle, aerospace, telecommunications, chemicals, mining, electronics, consumer goods etc (Ray, 2012). The largest trading and investment partners of the US globally would be Canada, China, Mexico, Japan, Germany and South Korea. United Kingdom: UK has fifth largest economy of the Globe and the second largest in Europe making inward investments, the second largest globally in outward investment (Botham, 2012). The main trading partner nations for UK are Germany, US, Netherlands and France. Venture financing and knowledge based industries are the most prominent of the nation where service sector contributes about 80% of the annual GDP. Again, the US and UK markets are classified by Dore as Stock market driven Anglo-Saxon Capitalism (Stewart and Allen, 2015). Japan: The Japanese economy is considered as the third largest in the developed economy, globally. The Japanese and Germans followed the welfare capitalism, in post World War 2 global economic scenario. The economic growth along with resource development such as skills, knowledge, infrastructure, research and development was given more importance over military expenditures post 1960s, making the economy the second largest from 1978 till 2010 (Doces, 2012). Excessive borrowing, social welfare, spending for its aging population and lack of recent day growth made the nation open to adopt new strategic outlook for economic growth and stability by 2020 (Srivastava, 2012). China: China is the socialist market economy where all the businesses are state run. Along with the production and market controls, skill and labour supply are government monitored and regulated. The foreign investments are screened on its soil while the Chinese business gets a greater amount of subsidy for fuel, electricity; fertilizer resources. The state owned enterprises have a greater access to the capital resources with lower financial costs while medium sized enterprises faces the lack of access to credit. China has the largest market with a 1.4 billion population and a state ran economy where the production boosts have made their global exports next to US. Nevertheless, the labour reforms, decentralization of industries to local Government level has started but still remains a big barrier in the reforms promised by the new Premier (Xianzhong, 2013). Germany: The German economy has developed to be the largest in Europe and achieved the global position of 4th Largest in the nominal GDP ranking (Scott, 2008). The social market economies that the government has undertaken are close to Japanese model in its Capitalist market operations and processes. Thus the economy supports deeply institutionalized financial practices with lesser complexity and a more productive outlook than that of UK or US economy (Please see Appendix for more typological descriptions). Germany is the third largest exporter globally after the US and China that accounts for 1/3 of its output. The trade surplus of Germany makes it the largest capital exporter globally (Schwarz, 2014). The Comparative Perspective analysis The capitalist and communist economies of the globe behave in different fashion. The internal socio-legal and political environments in a certain economy makes the comparative criteria for itself. The US and UK economy is a Stock-market oriented capitalism while Japan and Germany follows more of a productivity driven Socio-capitalist outlook (ABCNews, 2015). Kohter suggested the ‘Diamond of National Advantage’ where the competitive force of sustained development had been got through sustained competitive development. The car or automobile manufacturing industry is considered as an example. The competitive advantages of the Japanese car have made the country flourish in manufacturing technology development for ‘economy of scale’. Japan has maintained that it would produce cars with technology in its producing process achieving plenty of production with lesser manpower. The other objective was to sell the technology to others who wanted to have them, Toyotaism is one such innovative operations system applied in its production. Chinese had been manufacturing cars in huge numbers (66,482,439 in FYI 2005 to 87, 663,968 in FYI 2013). However, the processes are labour intensive and thus the economies of scale for Chinese cars are much lesser to its European and American counterparts. On the other hand, economies such as UK, US, Germany and Japan had a constant growth in accordance to its open market norms developing infrastructure for sustainability with increase in productions for cars. Japan exported its technology to other nations like UK and US, making their production more vibrant and aggressive gaining sustainability via economy of scale. In comparing the economy, the best example would be when perspective of car produced to average scale of individual income to sustain and maintain a car is measured. China is the topper in car production, not for domestic use but for exports to other economies. Whereas productivity oriented Economies like Japan, UK or US developed a more robust consumer demand oriented process those were boosted by a mix of Technology, skills and innovation. In historical perspective the economies of the US and UK are more of a traditional economy of capitalism driven by stock market exchanges, absent in the Chinese markets (Wacke, 2014). Strong socialistic laws govern the idea of state owned investments and controlled markets creating the entry barriers for other international businesses on their soil. Hence the market economy of China is driven by the Global imports of goods at a cheaper price due to its reach to resources and cheap manpower availability (Evans, and Wong, 2015). Conclusions The skill development, individual purchase capacities, GDP like economic indicators are very much a state policy oriented effects. However the changing Global dynamics and the internal equations of the nations in terms of Porter’s 5 force model are framing the businesses and strategies for the next big leap. Based upon the home grown demands from consumers and suppliers the businesses have shaped its production models to suite a global market oriented pricing via its operations. The difference in the car industry of UK, US, Japan and Germany to that of Chinese counterparts are done to assess the economy of scale perspectives for various economies in global context. Reference List Ahuja, S., 2000. Role of Economic and Social Infrastructure in Human Resource Development. Vision: The Journal of Business Perspective, 4(2), pp.20-28. Barnes, B. (2007). Relationship Quality in Business Relationships: An International Perspective. Total Quality Management & Business Excellence, 18(8), pp.845-846. Basu, S. and Taylor, A. (1999). Business Cycles in International Historical Perspective. 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Chinese Economy, 26(6), pp.25-38. Yasukachi, T., 1986. The Underground Economy in Japan. Japanese Economy, 15(2), pp.66-89. Appendix: Table of Institutional Typology Read More