How We Compete Book Review

How We Compete by Suzanne Berger and the M.I.T. Industrial Performance Center. 333 pages.

This is an excellent book for those who truly wish to understand how the impact of globalization has affected companies ability to remain competitive. It is based on thorough research, and so cuts through a lot of rhetoric and misconceptions about the challenges and benefits of globalization.

This book really debunks the myth that globalization has robbed Americans of jobs, and that protectionism is the answer. The authors prove the point that technology has actually replaced most workers.

This technology is also what allows U.S. companies to more call centers to India, for example. For this reason, laws to restrict immigration will also not protect any U.S. jobs, because technology allows capital to go across borders. In fact, countries are even losing the ability to set their own interest rates and money supply, since capital is so fluid.

Without technology, jobs could not go to China and India just because they are low cost. Companies can no longer compete based on just low cost, they must add service and individualization as well. Target is a perfect example of a low-cost provider that added service, in terms of branded designer merchandise, and individualization, in terms of its Baby Shower and Wedding gift services.

Technology has also meant that companies who modularize will compete more effectively. Each portion of the supply chain can be out-sourced to the company in the country which does it best. This increases quality and lowers costs.

Even though China and India are growing quickly, the authors find that the world is not flat yet, and it will take a long time for them to "catch up" to the Western world,despite the growth in Bangalore and Shanghai.

The authors found that the strength of U.S. companies are due to the open environment that allows innovators, technologies and organizational forms to emerge and compete. This encourages productivity and reduces stagnation. This is a result of venture capital, connections between a product's research and its end users, and flexible labor markets. To remain competitive, the U.S. needs to foster this environment, and not focus on protectionism and tax penalties that inhibit it.