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Warehouse

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Submitted By capricorn357
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Increasing Global
Competition and Labor
Productivity: Lessons from the US Automotive
Industry
MCKINSEY GLOBAL INSTITUTE
Martin Neil Baily
Diana Farrell
Ezra Greenberg
Jan-Dirk Henrich
Naoko Jinjo
Maya Jolles
Jaana Remes

November 7, 2005

Preliminary
Not for quotation

1. Introduction
Increasing global competition is changing the environment facing most companies today. As trade barriers fall and transaction costs decline, new global competitors are entering previously more isolated domestic markets. In response to this intensified competitive pressure, local companies are pushed to enhance performance by innovating and adopting process and product improvements. This domestic sector dynamic leads to higher productivity, which, in turn, can create sustainable competitive advantages for companies, as well as being the most important driver of job creation and per-capita income growth for the economy.
This link has been established in McKinsey Global Institute’s extensive country productivity research.
Our new study goes further than previous research by focusing on how increasing global competition leads to productivity growth, using the US automotive manufacturing sector as a case example. More specifically, we have focused on the production of new vehicles in the US, including parts assembly. We have chosen this example because of the globally competitive nature of the automotive market and the size of the US in this market over our period of analysis. As we shall see, some of the non-US original equipment manufacturers (OEMs) had clear productivity advantages which enabled them to create significant competitive pressure in the US market.
In this report, we look at how the Big Three US OEMs responded to the changed competitive environment, how they overcame barriers to compete, or failed to do

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