How we Compete by Suzanne Berger and the MIT Industrial Performance Centre

Eric Sutherland August 04, 2007

The starts off with the Big Business politics of making governments put up supply barriers and finding that globalisation has swept it aside. The way forward is through applying innovation to outsourcing or off-shoring and ensuring the product or service is still under head office management back in their country of origin. With component manufacturing of the product and component outsourcing of the service, the core innovation is still under control. The danger being in the sub-contractors are becoming closer and be coming partners with greater access to the core product or service. The evolution of these partners is to end up being competitors. The three main markets of North America, Asia and Europe are all in the same position in trying to reduce costs and keep control of their intellectual property. The Japanese are worried about giving to much to sub-contractors or partners in China and other Asian countries. The World Trade Organisation (WTO) is having to police these relationships and globalisation is pushing everything at break neck speed, so instead of one country leading like Japan, Germany or USA its now the organisation that fine tunes all its operations from Design to Manufacturing with Logistics and then final delivery to their chosen markets. There is also the trade-off from start to finish of the cost model that might allow higher country costs with lower outsourced or off-shored costs in different countries around the world. A balance is also struck against cost of commodities vs cost of currency transactions. The $100 Laptop being a good example of innovation, sourcing costs and final assembly to final delivery ? will commodity and currency costs force changes due to globalisation. Also will there be service and support or will it default to a throw away product, then will recycling need to be built in to give green credentials.