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David Grigsby, a professor at Clemson University in South Carolina, recalls how just a few years ago newspapers blared: “Forget what you know about business. This is a new world, an e-world. You have to relearn everything.”

That’s all changed again, Grigsby told a June 18 symposium at Keidanren Hall in Tokyo.

The symposium, organized by Keizai Koho Center, was part of a program to invite educators from U.S. business schools to Japan for exchanges with corporate officials, government bureaucrats and experts. Twelve U.S. scholars took part in the nine-day program, the eighth of its kind, which took them to such firms as Toyota Motor Corp., Matsushita Electric Industrial Co. and NTT DoCoMo.

“The recent failures of so many of the dot-com companies has caused us to revisit the fundamentals of business as they apply to the Internet technology — the fundamentals of business that do not change,” Grigsby said.

The Internet is “only a tool” — albeit a powerful one — just like other information technology innovations, and “it is only as good as the uses we make of it,” said Grigsby, associate dean for graduate program & research at the university.

“The Internet does not, as some once thought, replace all conventional ways of doing business, nor does it overturn all traditional competitive advantages,” he told the audience at the symposium.

“As a matter of fact, much of what the Internet affords to strategic managers is not necessarily decisive in competition, but simply enhances current ways of doing business — keeping customers better informed, typing us more closely to our business partners, processing orders, and procuring inputs.”

According to the professor, many of the dot-com’ers forgot the basic concept of business — that long-run profitability must be linked to a company’s sustainable competitive advantages, and that to be sustainable, a competitive advantage must be built on a foundation that is difficult for other companies to successfully imitate.”

The Internet has affected industry structure in three ways: by creating new industries like online auction houses; by consolidating, through the digital marketplace, some existing industries that had previously been fragmented; and by changing the competitive dynamics within existing industries, Grigsby said.

While the Internet’s capacity to deliver information cheaply and efficiently to all levels of the supply chain has had positive benefits for individual firms, its impact on an overall industry can be mixed, he noted.

The availability of cheaper information reduces transaction costs, but it also increases the number of companies that can be viable competitors within a given industry by lowering barriers to entry. The result is either no change or, more likely, reduced profitability for the industry, the professor said. “The predictions of large economic benefits from the adoption of Internet-based information processing have simply not been borne out.”

In the Internet business environment, most firms in an industry, as they try to approach customers quickly, chose to adopt off-the-shelf software that is also available to their competitors. This has caused a “leveling effect” that migrated competition toward price rather than service, he said, citing the example of home banking services, in which “no bank ends up with an advantage.”

Overall, he said, the Internet has stiffened competition within industries, so business strategies of individual firms take on added importance. “For the individual firm, long-range profitability is dependent on its ability to read the new landscape and find ways to leverage its unique abilities into sustainable competitive advantages.”

New economy vs. old

During followup discussions, Koichi Nishioka, an editorial writer for the Nikkei Shimbun, said that what counts in the Internet age of business is whether or not a company has strong foundations of its own.

Nishioka cited the once-popular distinction between “new-economy” and “old-economy” firms, and observed that there may be situations where the “old-economy” firms have an edge.

One example, mentioned by Grigsby, of combining the old and new to one’s competitive advantage is Barnes & Noble, a major U.S. bookstore chain that accepts at its bricks-and-mortar branches returned merchandise purchased through its Internet site — a service that cannot be matched by the Net-only Amazon.com, he said.

Kiyoshi Yamakawa, adviser to Sony Corp., told the audience how the Japanese electronics giant plans to cope with socioeconomic changes in a new phase of the Internet age to be brought about by the spread of broadband services, which he said will have a “much larger impact than the introduction of narrow-band (Internet).”

In such a business environment, he said, “The contact between corporations and customers become more complicated.” The key to surviving the broadband age, in Sony’s case, will be how it can utilize its advantages as the supplier of both the gateway — TVs, personal computers, the PlayStation game machine, mobile phones or personal digital assistants — and the content, such as movies, games and music.

“It is important that Sony group’s gateway divisions and the content units, instead of pursuing independent strategies, work together for common objectives,” he said.

Another key point is whether the firm can create a “community” of customers with common values, ways of thinking or personal interests. “If we can build this up, we will be able to provide products and services that will strike a chord in the hearts of its members, thereby fostering customer loyalty,” he said.

“Companies that cannot create such a community will be relegated to manufacturing low value-added products that can easily be imitated by competitors.”

Globalization challenges

During the same session, Prem Parkash Gandhi, executive director of Plattsburgh State University Institute of International Business Education, Research and Training, discussed the future of multinational corporations amid environmentalist and labor movements opposed to the globalization of the economy.

While Gandhi lauded the benefits of the globalization that has taken place over the decades since the end of World War II, he also noted that emerging opposition toward free trade “has to do with the lack of concern on the part of multinational corporations about the environment, labor policies and national sovereignty.”

However, despite the concerns of opposing forces, he said, the globalization of business is here to stay, and strategies need to be developed to ensure maximum benefits and fairer distribution of gains from the phenomenon.

“I strongly believe that trade and investment are the only two vehicles of properly allocating resources in the world economy, and global businesses have a major role to play in the process,” he said.

What strategies can global businesses develop for the future?

“For one thing, regardless of President Bush’s stance on the Kyoto Protocol, U.S. business leaders and multinational corporations cannot avoid the issue of environmental degradation — either in North America or the rest of the world,” he said. “Environmental protection and global warming have already entered the worldwide mainstream, including the discussion at the World Economic Forum in Davos. Participation by an increasing number of delegates from NGOs and environmental groups in the Davos meeting in recent years is one indication.

“No multinational corporation can afford the negative publicity given to them by environmental groups at protest rallies. On the other hand, it is good business to be recognized as excellent in this area.”

The professor also touched on the issue of labor standards.

“One of the major strengths of Japanese corporations has been their labor management and human resources management. (But) a survey that we carried out on Japanese firms and their subsidiaries in Canada seems to suggest that, in fact, the strengths that they have in their labor-management relations (domestically) are not practiced at their subsidiaries abroad,” he said. “Multinational corporations have to think very seriously in terms of their role in transferring technology and management practices.”

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