How We Compete

This book reviews the status of research conducted by MIT’s Industrial Performance Center between 1999 and 2004 on corporate strategies to cope with the globalizing economy. The reality presented here is complex, and the book goes largely beyond the traditional debate opposing the supporters and opponents of globalization. An excellent framework for thinking is provided, and several common assumptions are debunked, for example, by showing that the decision to outsource functions to take advantage of low-cost labor in other countries can be very costly indeed!
– Part one offers a summary of trends observed in the economy as well as the public opinion on this topic. It describes the two main globalization theories, namely, the convergence model, according to which globalization tends to smooth out cultural and national differences – and so differences between companies in the process – and the theory according to which each company will respond differently to globalization depending on the economic context from which it springs.
– The author proposes a third model, known as “dynamic heritage,” which hypothesizes that the best response to globalization depends on the characteristics of the company itself, as well as its history. Four main lessons can be drawn concerning the best way to excel in a globalized economy, i.e. match the best or outsource to the best, build your strategy based on your company’s particular heritage, don’t necessarily try to set salaries as low as possible, and make a conscious, well-considered decision. These lessons are developed and abundantly illustrated in parts 4 and 5 of the book with examples of successes and failures of a very wide range of companies.
– Parts 2 and 3 provide an analysis of trends in the economy that highlights the fragmentation and breakup of various company functions, leading to a growing reliance upon outsourcing. Using the metaphor of “Lego” bricks, the author describes a world in which businesses are assembled and disassembled according to the desires and requirements of the whole. She also analyzes the advantages and risks connected with the decision to delocalize or outsource.
– Finally, the last section covers all of the observations utilized to draw conclusions and give advance on the best strategy to adopt in coping with globalization. The author emphasizes the fact that there is not magic formula and that all options are possible so long as they are adapted to the characteristics of the company and consistent with its past decisions.