As the world becomes a smaller place, economies are shifting away from national economies to global economies. Robert Reich, Ira Magaziner, and Michael Porter each offer a different view of how a company remains competitive in this global economy. Reich stresses the difference between American-owned corporations and American competitiveness. Magaziner highlights the growing need of innovation and the avoidance of national complacency. Porter focuses on his diamond of national competitiveness.
While Whirlpool is an American owned company—the company’s headquarters and upper management all operate out of America—the majority of the company’s factories and production lies overseas in South America and Asia. Similarly, while Toyota is a Japanese owned company, it has increasingly manufactured its cars within US borders. Whirlpool is an American company but does not benefit American competitiveness. Reich maintains that “foreign-owned businesses that benefit national competitiveness most are those that commit their engine of competitiveness to the host country.” Whirlpool may be American run, but Toyota’s factories in America create American jobs and train an American workforce, both commodities in national competitiveness. Reich further emphasizes the importance of a skilled work force: “A nation’s most important competitive asset is the skills and learning of its work force…[and]…National policies should reward any global corporation that invests in the American work force.” Stressing the skilled work force, as Magaziner has noticed, is not just an American necessity.
Magaziner gives two examples of countries who take national pride in training the work force: Korea and Singapore. Both were third world countries in the 60’s but now boast first world economies. The key was the government’s intense investment in education and companies’ investment on export. While Korea’s exports came mainly from domestic companies such as Samsung, Singapore lured many foreign companies such as Apple and Texas Instruments to open factories in Singapore. The results are the same: a low-pay, high-skilled work force producing for a fraction of the cost to produce in the US. The US on the other hand has fallen heavily complacent on its industrial might. No one could challenge American ingenuity, especially in high tech arenas such as appliances. GE, however, learned its lesson when Korean microwaves came over cheaper and better quality than American microwaves, forcing GE to source its microwaves line. GE found the best and only way to beat low wage competition was to develop technology which would cut costs. Its advanced refrigerator plant is a prime example of advanced technology beating out cheap labor. The plant can afford to pay its workers over ten times the wage and still produce the fridge at a cheaper price.
All of these factors fall into Porter’s diamond of national advantage. The diamond consists...