The Effects on Pricing Strategy

The cost of American produced goods has been a significant and detrimental factor in the marketing of these products globally. American firms are addressing this problem in two important ways.

First, American firms are establishing production facilities in foreign countries. This strategy enables American companies to produce goods at costs which are more comparable to those of their international competitors. Additionally, foreign sourcing enables American firms, in many instances, to reduce transportation costs.

At times, however, foreign production creates problems with respect to product quality, which, in turn increases the ultimate cost of production. To counter this problem, American firms must provide strong onsite management and training.

For American production of goods for exports, Americanfirms have attacked the cost of production problem through a strategy involving a shift in emphasis in manufacturing management. In the recent past, the emphasis in manufacturing management was on materials inventories, ordering and production lead times, labor and material efficiency, workinprogress (WIP) levels, finished goods inventories, and so forth. The emerging emphasis in American manufacturing is on justintime 3(JIT) techniques. JIT production techniques emphasize the elimination of waste, which is defined as "any activity performed within a manufacturing company which does not add value to the product"

A further analysis of the approximately 50 percent of the companies which do feel a need to get closer to their customers provides an equally disturbing insight. Bennett, & Hymowitz (1989, p. B3) report that, among this group of companies which recognize the need to get closer to their customers, "only 5% to 10% are doing the work it takes to get there." Thus, while the trend reported is timely, welcome, and beneficial, it is far from universal among American marketers, and the level of effective application is nothing short of abysmal.

The realization by American manufacturers that it was largely their own substandard productivity, as opposed to foreign trade barriers, the exchange value of the dollar, and 11so on that were harming their global marketing efforts prompted them to introduce stringent production cost reduction programs. There is, however, just so far that a company can go in improving productivity through production cost reduction.

The accent on quality was lost in American industry in the postWorld War II era, when the country's industry could sell almost anything that it made, at a time when the quality level of foreign made products was of no great worry (Halberstram, 1986). To be sure, there were advocates of quality control in the United States, such as Edwards Deming; however, American industry was in no mood to listen to them. Unfortunately for American industry, someone else did listen to Deming the Japanese. The superior quality control procedures of today's Japanese industry were originally developed under the guidance and tutelage of Edwards Deming. Further, the statis tical and mathematical element of Deming's procedures, and, in turn, those of Japanese industry, were based on the work of another American quality control expert, Walter Shewhart.

 

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