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06/27/95

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Global companies must add value, not simply be bigger, speakers tell conference on global manufacturing

STANFORD -- Japanese industry excels at planning, a crucial ingredient in business success. Americans, on the other hand, are more likely to practice "ready, fire, aim" planning that reacts quickly to change but is less precise. The difference was illustrated by the quick response to restoring vital operations after the Northridge, Calif., earthquake vs. the slower recovery from the quake in Kobe, Japan.

For leaders of global companies, the ideal is a blend of the two methods.

"Both of these styles have tremendous value and you gain strength by crossing that boundary between them," Philip M. Condit, president of the Boeing Co., told international business and academic leaders attending the Global Manufacturing Associates Roundtable on June 14. The meeting was sponsored by the Stanford schools of Business and Engineering.

The traditional view of creating a global company was to take a domestic company and keep making it bigger, said Stanford Business School Dean Michael Spence. "The new model is that a global company adds a substantial amount of value . . . accessing excellence around the world wherever it exists and deploying it successfully. This can involve access to technology, human resources management, finance, information systems and all the things global companies wrestle with."

Boeing, said Condit, sells globally and has a somewhat global supply chain but is still completing the transition to being a global company. To be completely global, a firm must have the ability to access capital resources globally; develop a system for getting the highest quality, lowest cost parts and components, and address the political realities of the global marketplace.

Communicating across cultures and recognizing the value of a different culture are among the greatest challenges as companies become more global, Condit said. He recalled that in 1972, Boeing sold 10 of its early 707 jets to China and had to deal with the skepticism of Chinese airline officials who came to Washington state to watch the process of building the planes.

"They were sure we were up to something strange because whenever they visited our factory there was hardly anyone there and yet the planes got built. They came from a culture where factories were labor intensive"

The Chinese learned to appreciate the value of Boeing's assembly system and today China is a $7-billion customer of the firm's aircraft.

In addition to recognizing the values that different cultures bring to the business environment and dealing with political questions, Condit said, two other important issues are attitudes toward knowledge transfer and internal morale.

Firms often are concerned that by transfering knowledge to customers or trading partners, they may be giving information to future competitors. "I believe this fear is overblown," he argued. "Look at all the examples where a technology advance appears at various locations at the same time. Successful competition depends on constantly moving ahead."

Firms also must deal with the concern of their workers that the jobs being exported by international agreements diminish their opportunities. "As an enterprise grows, opportunities grow," Condit said.

Mark Cutkosky, associate chair for design and manufacturing in the Engineering School's Mechanical Engineering Department, described some of his work studying barriers to communication during a project linking a number of organizations to jointly design a project.

"Our most significant finding was that when all project documentation was put on line [to be shared by people working at various locations], it allowed people joining the process later to come up to speed rapidly," he said.

Linking those working on the project electronically allowed people to step in as needed to solve problems and move the project along.

The on-line process didn't mean project members met only electronically. They still had to meet face-to-face occasionally to understand one another as people and know how each designer thought, he said.

The complexities of managing global supply chains were discussed at the meeting by Hau Lee, professor of industrial engineering and engineering management; Seungjin Whang, Business School associate professor of operations, information and technology; Steve Delaney, process manager for product system at Ford Motor Co.; and Uldis K. Sipols, director of Ford's automotive component division--purchasing.

Global trade and finance issues were the final topic of the day at a panel discussion by James. E. Howell, the Theodore J. Kreps Professor of Economics at the Business School; George Shultz, the Jack Steele Parker Professor Emeritus of International Economics at the Business School; and John B. Taylor, the Mary and Robert Raymond Professor of Economics in the School of Humanities and Sciences.

While Shultz described his basic optimism about the world economy, panelists agreed it is a time of change. The longstanding trade partnership between Europe and the United States is weakening as Europe is drawn closer to the emerging economies of Eastern Europe and the United States developes stronger ties with Asia, Howell said. The current discussion of the U.S. trade imbalance with Japan is focusing on the automotive industry, said Taylor, an industry in which the United States lags. The discussion could be far different if it focused on service and aerospace industries, areas where Japan lags.

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