Managing for the Future [Hardcover]

It is difficult to know how much value it is possible to get from reading a book that examines future trends nearly 15 years after it was published. The earliest essay in this book was written in 1986. There is a nearly inevitable dated feel to this kind of selection that would kill the work entirely for lesser thinkers.

Being Drucker, however, there is still an awful lot to draw from this collection. Divided into four parts (economics, people, management and the organization), there are a number of absolutely brilliant essays. Favorites are hard to choose, but I particularly recommend "The Poverty of Economic Theory" and "Permanent Cost Cutting: Permanent Policy".

As usual from Drucker, darned good reading-- insightful and smart.

1. Contrary to popular belief, many of the US multinationals are advancing rather than retrenching in Western Europe and in Japan.

2. A small car plant in Fremont, Ca is jointly owned by GM and Toyota and was designed to teach GM how to build small cars profitably. The two cars produced are the Chevrolet Nova and the Toyota Corolla FX.

3. Going transnational is not confined to manufacturing firms. Companies become transnational to gain leadership positions in the developed world.

4. In an age of sharp and violent currency fluctuations, this means a leader must be able to innovate, to produce and to market in every area of the developed world - or else be defenseless against competition should foreign-exchange rates sharply shift.

5. In the early 80s, currency fluctuations approached 50 percent due to a stronger dollar and high interest rates. The world market share of manufactured goods produced by the US based companies stayed at 20 to 22 percent, a level sustained since the 60s. Exports decreased in steel, automobiles, consumer electronics, machine tools, and semiconductors. American manufacturers with Western European ventures substantially increased their market penetration in computers and computer software, in pharmaceuticals, specialty chemicals, telecommunication equipment, and financial services.

6. No company was hit harder in the early 80s by the tide of Japanese imports into the US than Ford. What saved Ford was its leadership position in the European Market, giving profits and cash flow to pull it through the dismal years. Major US banks accounted for 50 percent of the services during this time period.

7. International trade has been steadily slowing down for the most of the past decade. But international investment is booming as never before. Most of the investments are in securities. A third is permanent investment in manufacturing and financial services. Trade is becoming dependant on investment.

8. One-fifth of the capital invested in US manufacturing firms is in facilities outside the US. About One fifth of the output of US manufacturing is offshore. Three quarters of the output is for sale abroad and one quarter is exported back to the US. Major American commercial banks and major brokerage firms have assets invested abroad through foreign branches.

9. Protectionism is a minor factor in international investment.

10. The protection of foreign investment in case of war is in the self-interest of every single free world country.

11. World investment rather than world trade will be driving the international economy. Exchange rates, taxes, and legal rules will become more important than wage rate and tariffs.

12. Between 1986 and 1991 US manufacturing exports nearly doubled with big sales to Japan and West Germany. The export boom fuel US economic expansion. The list of export items during the economic jump, included: jet engines, heart valves, and sophisticated software. It included no tech items, such as, movies and rock recording, running shoes, blue jeans, and office furniture. Among the star performers were firms that have been active in the world economy for a long time and many who for decades had big plans aboard.

13. All successful export products had clear product differentiation. They were distinct. The successfully export products were high value added goods. Most of the export successes had clearly defined markets and clearly known customers. The world market is a foreign market only in statistics.

14. The winners in the US boom were middle-sized companies with high expertise in a given field. They are all single-product or single technology companies.

15. A successful exporter must manage foreign exchange exposure and avoid foreign exchange losses.

16. Exporting and manufacturing abroad complement each other.

17. Quality, design, service, innovation, marketing have become more important than low wages. Low wages does not give enough of a competitive advantage to matter. Transportation, communications, travel, insurance, and finance offset labor savings with increased cost of distance.

18. Blue-collar costs in US manufacturing account for 18 percent of total costs. Labor Costs are dropping as productivity is rising. GM still has a blue collar cost of nearly 30 percent - in part becomes of the restrictive work rules in its union contract. Toyota and Honda in US plants want to reduce labor costs to 15 percent within a decade.

19. Japan wants control of brainpower.

20. Japanese companies are quickly restructuring their organizations on the assumption that the winner in a competitive world economy is going to be the firm that effectively shortens the product life of its own products. New accounting measures time costs against the benefits of finished-goods inventory.

21. Statistical Quality Control, SQC is a rigorous scientific method of identifying the quality and productivity that can be expected from a given production process in its current form so that control of quality and productivity can be built into the process. SQC can instantly spot malfunctions and show where they occur, a worn tool, a dirty spray gun, an overheating furnace. SQC uses small samples to identify problems. Malfunctions are reported immediately, allowing operators to correct problems in real time. SQC quickly identifies the impact of any change on the performance of the entire process. SQC identifies where and often how, the quality and productivity of the entire process can be continuously improved.

22. In US factories, especially mass-production plants, non-operating, blue collar employees substantially outnumber operators. The introduction of Statistical Quality Control almost always increases the number machine operators. First line supervisors are eliminated, with only a few trainers that take their place. SQC makes it possible for machine operators to be in charge of their work and make this control mandatory. No one else has the hands knowledge needed to act effectively on the information that SQC constantly feeds back.

23. Most US brand good sold in Japan are manufactured there rather than imported. US brands that have good leadership in Japan are computers and software, soft drinks, candy, analytical and clinical instruments, and pharmaceuticals.

24. Japan is the largest buyer of US farm products. There is not one product that could not be purchased elsewhere for a cheaper price. Japan is buying from the US to protect their exports to America. US beef and feed commodities are exported to Japan meeting a substantial demand. Japan's ban on foreign rice creates demand for US wheat.

25. Japanese barriers to foreign entry are extremely high. American business that have been allowed entry into service have done well while substantially improving standards and quality.

26. The investment driven economy worked in Japan. The highest number of Japanese tax exempt saving accounts was strongest among the fairly low income earners. In 1998, the tax exempt accounts were scrapped. The savings helped fund the explosive growth of the Japanese economy. A rapid growing Japan did not have to borrow abroad. Japanese loan rates were 5 percent compared to 15% in the US for commercial loans. Investment and low capital costs help Japanese businesses become profitable.

27. Any country that has given a tax exemption or tax deferment to saving ahs had the same experience as Japan: middle and lower income earners take the most advantage of these opportunities. "We have learned since Joseph Dodge that nothing works as well in a developed country as legalized tax avoidance." The high cost of capital destroys confidence.

28. Latin America, rather than Japan, holds the key to the US trade deficit.

29. The US is the world's largest producer and exporter of agricultural and forest products, and about one-third of the trade deficit is directly traceable to this collapse in prices and demand. Another third owing to the impact of raw-materials depressions and Latin America was one of US manufacturers best foreign customers.

30. Japan's export surplus is far less a result of industrial prowess than of raw-materials depression. Japan is the world's largest raw-material importer is the beneficiary.

31. US food exports to Japan will not be expected to bounce back. The US will be hard pressed to maintain current export volume with the developed world in the years to come. When foreigners convert their dollar claims into US assets and buy American business and real estate this will not be tolerated politically.

32. There are two ways to cut the trade deficit: a very sharp recession cuts domestic consumption by 10 percent or revival of Latin America as a customer for US manufactured goods.

33. Until the raw materials depression hit, Latin America worked effectively in a market economy and participated in rapid economic growth. Latin America has three times as much capital as foreign debt.

34. Latin America needs to stop inflation by turning off the spigot of government spending; dismantle the unproductive monopolies owned by the government or the military; cut excessive nominal tax rates that discourage honest enterprise, but increase tax collection.

35. Mexico has dismantled governmental monopoly industries. Every day the Mexican economy is becoming more closely integrated with the US. A US, Canada, and Mexico agreement could create a North American Economic Community. Foreigners can now own a 100% of an industrial park in Maquiladora, the maquila. Parts and supplies for a maquila are waved through at the border and enter Mexico duty-free. In turn, the maquila products when exported to the US are subject to American duty only on the value added in Mexico. Maquiladoras have created 500,000 new jobs in the last decade.

36. Brazil has sold off a hundred unproductive government enterprises.

37. What Latin America needs from the US is trade, not aid.