Building Competitive Advantage through a Global Network of Capabilities

For a good approach to assessing the competitive impact of changes in cost structure over time, see Thompson Arthur A. Jr. , “Strategies for Staying Cost Competitive,” Harvard Business Review (January/February 1984).

See, for example, Kaplan Robert S. , “Yesterday's Accounting Undermines Production,” Harvard Business Review (July/August 1984). See also Cooper Robin Kaplan Robert S. , “Measure Costs Right: Make the Right Decisions,” Harvard Business Review (September/October 1988) and Fradette Michael J. , “Cost Accounting Overhaul: Making Your Financial Reports the Linchpin of Strategic Decisions,” Corporate Controller (November/December 1988) for a brief discussion of traditional systems and a good overview of activity-based costing.

See Stalk George Evans Philip Shulman Lawrence E. , “Competing on Capabilities: The New Rules of Corporate Strategy,” Harvard Business Review (March/April 1992) for an excellent description of capabilities.

The definition used here for capabilities contains some elements in common with the notion of core competencies as advanced by Prahalad C.K. Hamel Gary , “The Core Competence of me Corporation,” Harvard Business Review (May/June 1990). As the authors note on page 82, “Core competence is communication, involvement, and a deep commitment to working across organizational boundaries. It involves many levels of people and all functions.”

A similar point is made in a study by Craig S. Galbraith documented in “Transferring Core Manufacturing Technologies in High-Tech Firms,” California Management Review, 32/4 (Summer 1990), which found that when core technologies were transferred between facilities, a correlation existed between the distance separating the facilities and the time required for the receiving plant to match the productivity level of the originating plant.

Cohen Morris A. Lee's Hau L. “Resource Deployment Analysis of Global Manufacturing and Distribution Networks,” Journal of Manufacturing and Operations Management, 2 (1989) represents an excellent example of this type of model.

Markides Constantinos C. Berg Norman , “Manufacturing Offshore is Bad Business,” Harvard Business Review (September/October 1988).

Kogut Bruce , “Designing Global Strategies: Profiting from Operational Flexibility,” Sloan Management Review (Fall 1985).

Porter Michael , “The Competitive Advantage of Nations,” Harvard Business Review (March/April 1990).

Carlton Jim , “Conner Peripherals Says Profit Doubled; Seagate Earnings Fall,” Wall Street Journal, April 18, 1991, p. B8.

Richards Evelyn , “Looking for the Asian Edge: Low-Cost Foreign Labor Helps a U.S. Disk-Drive Maker Lead Its Industry,” The Washington Post, June 17, 1990, p. HI.

“The Non-Conformist,” The Economist, August 22, 1992.

Between 1987 and 1988 alone, average hourly labor rates expressed in U.S. dollars increased 24% in Taiwan, 16% in Singapore, and 37% in Korea. U.S. rates, by contrast, increased by just over 3%. Nazario Sonia , “Boom and Despair,” Wall Street Journal. September 22, 1989, p. R26.

Brandt Richard , “Seagate Goes East—And Comes Back A Winner.” Business Week, March 16, 1987.

Fleary Lynn , Fortune, March 30. 1987, pp. 91–96.

See Clark Kim B. Fujimoto Takahiro . Product Development Performance: Strategy, Organization, and Management in the World Auto Industry (Boston, MA: Harvard Business School Press, 1991).

See, for example, Ohmae Kenichi , Triad Power: The Coming Shape of Global Competition (New York. NY: Free Press, 1985), pp. 5–6.

This section draws upon the book by Morgan James C. Morgan J. Jeffrey , Cracking the Japanese Market: Strategies for Success in the New Global Economy (New York, NY: The Free Press, 1991).

Markides Berg , op. cit.

Lessard Donald R. Lightstone John B. , “Volatile Exchange Rates Can Put Operations at Risk,” Harvard Business Review (July/August 1986).

Desta Asayehgn , “Assessing Political Risk in Less Developed Countries,” The Journal of Business Strategy, 5/4 (1985): 40–53. The article also presents a good overview of the strengths and weaknesses of traditional approaches to political risk analysis.

Levi Maurice D. , International Finance (New York, NY: McGraw Hill. 1990), pp. 389–390.

Matt Moffett highlights a similar finding for plant locations in Mexico in “Culture Shock.” Wall street Journal, Global Business, September 24, 1992, p. R13.

Ohmae Kenichi , op. cit., pp. 5–6.

This notion is not new, but as Dixon and Duffey point out, “while recognition of design's importance in keeping U.S. industries competitive in global markets has begun to increase, the actual response continues to be almost entirely in manufacturing: Automation of existing processes, material and labor cost reductions, quality control, and so on.” Dixon John R. Duffey Michael R. , “The Neglect of Engineering Design,” California Management Review, 32/2 (Winter 1990): 19.