The Challenge of Foreign Competition
FIN 500 – Global Corporate Finance
Case Study 2: The Challenge of Foreign Competition
JUNE 4, 2009
Chapter Summary
As the title of the case study clearly states, chapter 2, deals with issues relating to challenges of foreign competition. The case begins by describing how a domestically-based television manufacturing company – Stellar Television Company - conducts its operations, and how Japanese competition has begun distorting the company’s performance as time progresses. In the late 1950s Stellar employees earned a solid $50 a week, and a Stellar television was worth $250. Ed Johnson, who was the CEO of Stellar Television Company, measured the success of his company by calculating the amount of work hours needed by his employees to purchase 1 unit; so, in the late ‘50s it took a worker 5 weeks of work to earn a television. That number has been on a decreasing trend since the first year of the company’s operation, showing increasing labor productivity and growth for the firm.
In the early 1960s, Ed Johnson came face-to-face with foreign competition as Japanese televisions began coming into America. As a result of the increased competition, Ed Johnson is very close to start laying-off workers, and also on the verge of lowering employee’s wages. Therefore, in order to try and fix the situation he meets with his congressman, Frank Bates, and requests the he passes a bill limiting imports of Japanese televisions. After much argument and conversation Ed convinces Frank to sponsor a trade bill banning foreign televisions. This would gain him favor from the state, which would ultimately increase his chances of running for White House in the near future. However, things don’t go as expected when Congressman Bates speaks about a plan to keep out all foreign products entirely, so that to pass-on the benefits to other industries as well.
Literature Review
In my opinion, the main argument that the case study brings forth is whether increasing protectionism
Case Study 2: The Challenge of Foreign Competition
JUNE 4, 2009
Chapter Summary
As the title of the case study clearly states, chapter 2, deals with issues relating to challenges of foreign competition. The case begins by describing how a domestically-based television manufacturing company – Stellar Television Company - conducts its operations, and how Japanese competition has begun distorting the company’s performance as time progresses. In the late 1950s Stellar employees earned a solid $50 a week, and a Stellar television was worth $250. Ed Johnson, who was the CEO of Stellar Television Company, measured the success of his company by calculating the amount of work hours needed by his employees to purchase 1 unit; so, in the late ‘50s it took a worker 5 weeks of work to earn a television. That number has been on a decreasing trend since the first year of the company’s operation, showing increasing labor productivity and growth for the firm.
In the early 1960s, Ed Johnson came face-to-face with foreign competition as Japanese televisions began coming into America. As a result of the increased competition, Ed Johnson is very close to start laying-off workers, and also on the verge of lowering employee’s wages. Therefore, in order to try and fix the situation he meets with his congressman, Frank Bates, and requests the he passes a bill limiting imports of Japanese televisions. After much argument and conversation Ed convinces Frank to sponsor a trade bill banning foreign televisions. This would gain him favor from the state, which would ultimately increase his chances of running for White House in the near future. However, things don’t go as expected when Congressman Bates speaks about a plan to keep out all foreign products entirely, so that to pass-on the benefits to other industries as well.
Literature Review
In my opinion, the main argument that the case study brings forth is whether increasing protectionism
Bibliography: Tonelson , Alan & Kim, Peter. "U.S. Domestic Producers Lose Increasing Share of Home Market to Foreign Competition". American Economic Alert. Accessed on May 29th, 2009 . Kim, Suk & Seung, Kim. Global Corporate Finance. Malden, MA: Blackwell Publishing, 2006.