Germany’s industrial strength has been in the manufacturing of high performance products of excellent quality. A common virtue to all German companies is to get things right the first time in well-ordered plants.
The workforce is highly skilled, drawn from a population of young people who have passed through a traditional apprenticeship system. Their in-depth knowledge of manufacturing processes lets them more easily adapt to new technologies.
At the upper echelon of management, one finds managers with Ph.D. degrees in engineering who are well-versed in economics. Engineering is a degree held in the highest esteem among all professional degrees.
Most German companies have long had reliable supply chains that they utilize for the joint design of well-engineered products. Long-term business objectives mandate strategic management decisions with lower intervention levels from stockholders.
However, with rapid globalization of companies and their markets, the German approach to manufacturing management may have to evolve as well.
One must note that, as is the case with their Japanese counterparts, German companies tend to improve on their products and manufacturing processes, as opposed to emphasizing innovation as the U.S. companies attempt to do.
Their long history of very high labor costs forced German manufacturers to invest heavily in plant renewals through advanced production machines and in the process achieve at least tactical flexibility levels in many of their companies.
Japanese engineering has long concentrated on incremental innovation and commercialization of economically viable inventions.
Television, the VCR, and the CD player are a few products developed offshore (by RCA, Ampex, and Phillips, respectively) but successfully commercialized by Sony. In the 1960s, the Made-in-Japan stamp on products was seen as a symbol of unsuccessful imitations of their American and European counterparts, attempting to penetrate foreign markets based solely on a price advantage.
The following two decades caught the world by surprise when (once again) low-price but (this time) superior quality (strategically selected) Japanese household products flooded the world markets.
First came televisions, then audio equipment, and finally cars. Although the Japanese companies easily penetrated the U.S. and British markets (and in some instances completely eliminated local competitors), the European continent mostly shut these products out by protectionist actions. In the U.S.A., the local and federal governments joined forces in the 1980s to help the American auto industry survive and not suffer the fate of the television industry for example.
In the 1980s, numerous Japanese automobile makers opened assembly plants in the U.S.A., the U.K., and Canada in order to deal with the increasing local criticism that imports took jobs away from local people.
Though they were strictly assembly plants at the start, most of their valuable components being imported from Japan (for maintaining a highlevel of quality),
these plants now have their own local supply chains as a true step toward globalization. Like Germany, Japan must also heavily rely on exports of manufactured goods to owing the lack of local raw materials as and energy sources.
Most such export companies have developed their competitive edge through intense local competitions in attempting to satisfy the domestic population’s demand for high quality and timely delivery of goods.
The just-in-time production strategy developed in Japan could not be implemented unless manufacturing processes were totally predictable. Another factor adding to the low uncertainty environment was the concept of keiretsu (family) based supply chains, which in most cases included large financial institutions.
These institutions provided local manufacturing companies with large sums for investment, for capital improvements that did not come with any strings attached, thus, letting companies develop long-term strategies.
With the globalization of the world’s financial markets, it is now difficult for Japanese companies to secure such low-risk investments. Like their German counterparts, most Japanese companies have developed operational and tactical flexibility which they rely on for stable, repetitive mass production of goods.
However, unlike their European competitors, the Japanese companies have developed a fundamental advantage, significantly shorter product development cycles.
This advantage is now being challenged on several fronts by European and American competitors in markets such as telecommunications, automotive, computing, and lately even household electronics.
Japanese companies are currently being forced to shift to innovative product development and marketing as see witness several phenomena occurring worldwide:
(1) competition catching up with their productivity (including quality) and tactical flexibility levels,
(2) financial globalization eroding their long-enjoyed unconditional investment support, and
(3) penetration of information technology into all areas of manufacturing. It did not take long before for companies such as Sony rapidly shifted paradigms and stopped the economic slide.
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