The Challenge of Foreign Competition

Summary:

The article focuses light on issues relating to challenges of foreign competition. The authors describes of how a domestically-based television manufacturing company, Stellar Television Company, conducts its operations. And, with the entry of Japanese competition the company’s performance has decreased as the time progressed. Ed Johnson CEO of the Stellar Company convinces Congressman 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. At the end the author introduces to the topic of free trade which contradicts quota system on all imports.

Discussion of Concepts:

It is stated in the chapter that in the late 1950’s, Stellar companies employees earned $50 a week, and a Stellar television was worth $250. Ed Johnson, 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. This shows that the production rate of the American manufactures during that period was very slow. On the other hand Japanese companies had a superior technology and a cheap labor power which drive down the cost of production so they were able to sell the products at a very lower cost. As a result like of the increased competition, like Ed Johnson many of the American manufacturers started to lay-off workers, and also on the verge of lowering employee’s wages. In order to avoid losing business, most of the American manufacturers during that period demanded to implement Quotas.

A Quota is a restriction put on the quantity of a particular foreign good that can be imported into a country (InvestorDictionary, 2011). Quotas were present in 1950 in USA but were not implemented on all items. In 1959, the U.S. government established the Mandatory Oil Import Quota program (MOIP),...