Chapter Three
Theories of International Business

A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up familiar with it.

Max Planck (1858-1947).
Theoretical physicist, Nobel Laureate.

Introduction

In Chapter One, it was suggested that the reader should observe the daily news for the latest developments in international business and trade and consider their implications for the creation of global business strategies. While it was mentioned with the intention of a light touch, it was no joke. On the day of writing this paragraph – 9th March 2018 – the US, in the form of an Executive Order signed by President Donald Trump, imposed tariff barriers on imports of Steel (25%) and Aluminium (10%), citing national security issues to override WTO rules (Donnan, 2018, 9th March; Economist, 2018, March 10th). Within days, the EU was planning its retaliation, threatening to impose tariffs on a range of non-security related goods such as Jack Daniels Tennessee Whiskey and Harley-Davidson motorcycles (Brunsden, 2018, 16th March).

As an author, it is an odd experience writing what is effectively a daily blog on issues which were discussed in Chapter One as they panned out over a 250-year timeframe from Adam Smith onwards and which sets the scene here for a chapter providing the contemporary context for the design and delivery of 21st Century, competitive, global business strategies. Perhaps those UK and EU executives fretting haplessly about Brexit who we introduced to you earlier have a right to sweat after all. We discussed uncertainty but neglected randomness, a greater terror (see must-read The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb, 2007; and also, his new best-selling polemic, 2018, Skin in the Game: Hidden Asymmetries in Daily Life, for a discussion of contrasting perceptions on uncertainty and randomness).

Asked what his biggest fear concerning stability in government was, British Prime Minister Harold McMillan (disputedly) replied to the (male) reporter raising the question, “Events, dear boy, events”. Whether he said those exact words or not, there is surely a lesson in the message for executives charged with the conduct of international business on behalf of their corporations. Vigilance is essential, even where change is erratic, unpredictable and, at worst, apparently random.

 


Concluding Remarks

Porter offered a mammoth 855-page tome as a new paradigm to explain world trade, investment and innovation. Many of the criticisms alluded to above are misplaced or locked within the closed paradigms of their proponents. Others simply require further elaboration, a natural feature of scientific enquiry. Two key themes emerge from a closer reading of Porter’s research, each of which has huge significance in today’s competitive climate.

First, there appears to be a convergence of economic systems around the classical microeconomic models first proposed by Adam Smith and David Ricardo, particularly regarding the structure of markets and the Darwinian impact of competitive forces.

Second, the importance of sophisticated consumers as a key force in the economic process appears to be emerging as a profound driver of international competitiveness and company strategy. As Kenichi Ohmae observed in his influential book The Borderless World (Ohmae, 1990):

… the pressure for globalization is driven not so much by diversification or competition as by the needs and preferences of customers.

In the next chapter, Theories of Strategy and Competition, these two themes are considered as features of modern capitalism within a framework that acknowledges their historical antecedents and considers their contemporary consequences.

 


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All content © Colin Edward Egan, 2021