Anglo-Saxon Model VS Superior Rhine Model - Essay Example

Do ‘Nice Guys Finish Last?’ (Dore, 2006)? Will The Anglo-Saxon Model Ultimately Outperform The Superior Rhine Model? Table of Contents Introduction 3Reforms in Japan and Germany 3 Approaches to Comparative International Management 5 A Brief Analysis of an Anglo-Saxon and Rhine model 6 Application of Anglo-Saxon model and Rhine model in USA, UK, Japan and Germany 7 Conclusion 8 References 9 Introduction Capitalism can be described as the economic framework that is generally dependent upon the private possession of the different production means. In general, within the context of capitalism, the various production means are owned privately and the progression of an economy relies upon the profits that are accumulated in a free market (Dore, 2006). The chief objective of the study is to determine the effectiveness of Anglo-Saxon model that might ultimately outperform the superior Rhine model. Reforms in Japan and Germany The chapter ‘Nice Guys Finish Last’ tends to demonstrate the transformation that is needed for the reformers in Japan as well as Germany who tends to pay utmost attention towards escalating inequality as well as unfair competition. These reformers are further observed to impede the process of cooperation upon which the social cohesion has been grounded. They also promise to humiliate the quality of the lives of the people by a considerable level (Dore, 2006). In comparison to other capitalist economies, it has been noted that the institutional framework belonging to the Germany framework has been quite different. Markets of Germany are found to be instituted politically and socially monitored. The managers belonging to big German firms tend to come across capital as well as labour markets that are further found to be greatly controlled or arranged. This particular facet eventually facilitates capital as well as labour to play an imperative part directly into the day to day business operation. In other words, the German model related to advanced capitalism can be described as an economy possessing high wage along with high competitiveness in the world. It has also been apparent that the country practices strong social cohesion along with low degree of inequality in different dimensions (Streeck, 1996). The various institutions of numerous nations have been found to make proper use of the unique set of socio-economic institutions that generally resides in both social as well as financial markets. Furthermore, these institutions endorses specific framework of production that is also connoted as diversified quality production. The institutions during the 1970s as well as 1980s have made high wages along with their low distribution of the wages and income more effective. It can be stated that the institutionalised high-wage sort of economy such as Germany tends to face greater problems related to financial performances. It is quite significant for such an economy to meet a set of rules and policies in order to remain competitive and maintain cohesiveness in the society. The crisis prevailing in the German social market economy can be demonstrated in case of concurrence of three factors such as secular collapse of the model, the anxieties related to unification among the people of the society as well as the limitations that has been inflicted by the globalisation of the capitalist economy (Streeck, 1996). It can be revealed that the British as well as the Americans are considered to be the pioneers whose institutions along with the economic behaviour tends to confirm the principles of the neoclassical textbooks. On the other hand, Germanys as well as Japan’s institutions diverge from the principles that have been made in the neoclassical books. It has been apparent that the finance along with the corporate control structures had been quite alike in the 1920s in comparison to the later years. It was by the end of the post-war golden age that demonstrated the signals of convergence related to similar types of managerial capitalism (Dore & et. al., 1999). Approaches to Comparative International Management In the process of comparing the management and the organisational forms as well as processes, similarities as well as differences can be easily identified. Universalist theories explain the fact that the management as well as the organisations makes use of similar universal laws all over the world. It generally claims that the positive association between the sizes of the organisations along with the level of internal differentiation is valid all over the world owing to the fact that it is grounded on the basic features of human behaviour. Conversely, the particularist theories affirm that both the organisations as well as the management in distinct countries are most likely to alter. It further posits the fact that distinct explanations are required for distinct countries. According to the Universalist approach, it is often believed that the cross-national differences arising in the management as well as in the organisations are most likely to disappear in the near future. The particularist model on the other hand tends to believe the fact that the cross national differences arising between the management as well as in the organisations is likely to prevail in the economy for longer period until the nation initiates any steps in order to minimise the differences (Koen, 2005). The contingency theory related to Universalist approach tends to determine that the mechanistic structure can be appropriate in stable environment because of the fact that hierarchical approach is effective for routine operations. It has been found that the Japanese organisational structures differ in few aspects in comparison with the US organisational structure. Moreover, Japanese manufacturing organisations are viewed to bear taller hierarchies and more participation in the decision making process as compared to the US (Koen, 2005). A Brief Analysis of an Anglo-Saxon and Rhine model An Anglo-Saxon capitalism can be considered as an industrialist macroeconomic model. It generally emerged in the early 1970s and has been based upon the ideologies of Chicago school of economics. One of the key features of Anglo-Saxon model is that the degrees of regulation as well as taxes are quite low and the involvement of the government also tends to be quite low in terms of offering different effective services (Parker, 2005). Conversely, Rhine capitalism can be identified as one of the modern economic orders that are generally practiced in the Western Europe. The various characteristics of the Rhine model help to comprehend the capitalist economy effectively. In the context of the Rhine capitalism, it can be stated that there exists the happening of social association amid the employees as well as the unions. Power is distributed equally between the shareholders as well as the managers. The market tends to be well regulated by various policies and procedures and the people of the society tend to share common values in relation to the ideas of equality as well as harmony (Parker, 2005). Shareholders activism generally pays due attention towards the creation of wealth that have been described as the Anglo-Saxon model. The models pressurises the organisations to focus more upon paying high return on investments to the shareholders. While on the other hand, it can be stated that the Rhine model entails the corporations to monitor them by balancing both profits for the self as well as benefits for the society at large. Furthermore, the Rhine model tends to place short-term shareholders interest behind the long-term interest of the company. It has been observed that the Anglo-Saxon model is found to play a dominant role among the individuals as well as the institutional shareholders at large (Parker, 2005). Application of Anglo-Saxon model and Rhine model in USA, UK, Japan and Germany Rhine model is basically linked with the countries such as Germany and Japan through which the countries are capable of minimising the increasing inefficiency related to the market forces that prevail in the western model (Parker, 2005). The Anglo-Saxon model is basically useful in the UK as well as in the US due to its short-term orientation in comparison with the Rhine model that is based upon long-term perspective. In this similar context, the Anglo-Saxon model tends to place greater priority upon the shareholders value while the Rhine model tends to place greater emphasis upon the stakeholders value. The management of different companies within the background of Anglo-Saxon model tends to generally focus upon the utilisation of property as well as other tangible assets as the key financial performance indicators. On the other hand, the management belonging to any organisation operating with Rhine model do not have much internalisation. It further possesses a stable market orientation along with dedicated capital investment system. In the context of the Rhino model, it is often noted that the management tends to make use of numerous intangible assets such as investment as the chief performance indicators (Kwee, 2010). Conclusion Rhine model is considered to be the one of the most appropriate model according to the 21st century global economy. Since past few decades, it has been observed that the Anglo-Saxon model has been the model that has been preferred in numerous nations. However, in the present times, it is often viewed that the system relating to Anglo-Saxon model generates instability as well as insecurity in different regions of the world. The principles of the Rhine model have been dependent upon the regulated markets that is further poised between the rights of private capital versus the long term and social requirements of the functioning economy. Hence, gauging the benefits offered by the Rhine model in comparison to the Anglo-Saxon model, it can be stated that the most superior model is the Rhine model that can assist the nations at increasing social cohesions and the Anglo-Saxon model might outperform the superior Rhine model by a certain degree. References Dore, R., 2006. Stock Market Capitalism, Welfare Capitalism: Japan and Germany versus the Anglo-Saxons. Oxford University Press. Dore, R. & et. al., 1999. “Varieties of Capitalism in the Twentieth Century”, Oxford Review of Economic Policy. Vol: 15, Iss: 4, pp: 102-120. Kwee, Z., 2010. Investigating Tree Key Principles of Sustained Strategic Renewal. Difference Between Anglo-Saxon And Rhine Model. [Online] Available at: http://repub.eur.nl/res/pub/16207/EPS2009174STR9058922120Kwee.pdf [Accessed December 13, 2012]. Koen, C. I., 2005. Comparative International Management. McGrawHill. Parker, B., 2005. Introduction to Globalisation and Business: Relationship and Responsibilities. SAGE. Streeck, W., 1996. German Capitalism: Does it Exists? Can It Survive? Abstract. [Online] Available at: http://www.mpifg.de/pu/mpifg_dp/dp95-5.pdf [Accessed December 13, 2012]. Read More