Economic Integration: Tech-Enabled Synthesis

By Ghadar, Fariborz | Industrial Management, September/October 2006 | Go to article overview

Economic Integration: Tech-Enabled Synthesis


Ghadar, Fariborz, Industrial Management


EXECUTIVE SUMMARY

The world is shrinking, and companies can no longer count on thriving, let alone surviving, by isolating themselves. Both countries and companies grow more rapidly through integration, so it behooves organizations to devise management strategies to track political developments and monitor the productivity of employees worldwide.

12 TRENDS changing the world

A five-year research project reveals that the future of commerce worldwide will be greatly influenced by a dozen "global tectonics" that will affect business leaders across all industries:

1. Biotechnology

2. Nanotechnology

3. Information technology

4. Population

5. Urbanization

6. Disease and globalization

7. Resource management

8. Environmental degradation

9. Knowledge dissemination

10. Economic integration

11. Conflict

12. Governance

Once upon a time, businesses were either national or regional, and even international companies were apportioned into divisions that acted independently of one another. Countries too tended to be isolated, with foreign direct investment and even trade playing a relatively small role in their economies. Like a modern-day fairy tale, the characters in this global story have had to leave their respective enchanted forests and interact with each other. Simply insert the modern momentum of technology into this yarn, and we can see the entire picture unfold in which businesses and countries work together to solve their economic challenges.

More or less, the story can be summed up in this simple phrase: The world is shrinking and interconnecting. Economic integration has led to the interaction and cooperation of companies and countries through migration, trade in goods and services, and the free movement of capital, knowledge, and technology.

It should be no surprise that corporations and countries grow more rapidly when integrated. In fact, a number of these integrated corporations have grown so fast that of the 100 top economies in the world, 51 are global corporations and 49 are countries. In fact, Norway, listed at number 30, is bested by General Motors (at 23), Wal-Mart, Exxon Mobil, Ford Motor Co., and Daimler Chrysler (at 25 through 28, respectively). This would never have been possible without the benefits of economic integration.

One can even say that business has reached a time when a company cannot survive on its own. It must companion with not only local partners but, more important, with international corporations. Most countries and organizations do not have the internal resources - labor force, natural resources, and technology - to compete with increasingly complex global environments. The more effective method in meeting global economic opportunities and challenges is to create an economic alliance or network through cooperation, collaboration, flexibility, adaptation, risk and cost reduction, shared interest and objectives, closeness, openness, and commitment between entities. These economic relationships result in a state of synergy in which the combined output of the components is greater than the effort of each individual.

The Airbus consortium is a perfect example of a company that collaborates with other entities in various countries. Airbus started as a partnership between European aviation companies to compete with the U.S. giants, but in 2001 Airbus formally became a single integrated company. The autopsy of the integration is as follows: Companies in Britain export the aircraft's wings, while German suppliers provide the fuselage and the tail. Spanish companies manufacture the doors, and French companies oversee cockpit production and final assembly. More than 800 American companies supply in excess of 35 percent of the consortium's aircraft components, with 1,500 other providers located in approximately 30 additional countries.

Airbus changed the face of the airline business and encountered immense success by doing so. …

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