Need management help to Read the overview below and complete the activities that follow. (5 Questions)

Nov 16th, 2015
Business Finance
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Question description

World Strategy on Job Creation

Carefully read the following case and then answer the case questions at the end.

In a 2010 Bloomberg Businessweek cover story, Andy Grove, former chief executive of Intel, opened a debate on how to create more U.S.-based jobs. He argued that the call for more startup firms to create U.S. jobs is wrong. Mr. Grove said that the biggest problem with the creation of jobs in the U.S. is that the scaling up to mass production is now taking place in China, India, and other lower-cost countries instead of here in the U.S. He cited several high-tech firms that are operating on a "10X factor"—in other words, for every one U.S. employee, they can pay for 10 workers in China to build and even design their products.(1) (2)

Grove also pointed out that the issue goes beyond computer and electronic devices. In areas such as advanced lithium-ion batteries, both the mass production and the new innovations are occurring in Asia. The new wave of electric cars, such as the Chevy Volt, depends on batteries designed and produced in Asia. The U.S. had the lead in batteries for decades but lost it 30 years ago when America stopped making consumer electronic devices domestically. In alternative energy, which should be a job growth engine for U.S. firms, the story is even more lopsided. Though solar photovoltaic cells were invented in the U.S. and research has continued in improving them here for several decades, the large majority of photovoltaic panels produced today are made in China.

The solution, according to Mr. Grove, is to create financial incentives for firms to scale projects in the U.S. In the article, he proposed levying an extra tax on products made offshore that are shipped into the U.S., and to use this additional revenue strictly for large-scale projects built in the U.S.—a proposal that he believes would provide a significant number of new jobs. His provocative article spawned a variety of responses in ForbesThe Wall Street Journal, and other reputable news sources. For example, Tim Kane, writing in Forbes, noted that despite the manufacturing jobs being about 50 percent of the peak in 1979, U.S. industrial production numbers are near record highs. Mr. Kane views this as evidence of increased efficiencies, which in the long run are good for the economy. Additionally, he cited a report from July 2010 that shows that startup firms create a net of more than 3 million jobs in an average year, while existing firms actually decrease U.S. jobs by 1 million a year on average.(3) (4)

Other rebuttals commented that while Andy Grove is right about the need to create more U.S. jobs, he is off-base with his proposed protectionist taxes as a part of the solution. Vivek Wadhwa (of Harvard and Duke Universities) argued that since most U.S. blue-chip companies derive a majority of their sales from overseas (as also noted in this chapter), they will be the first to suffer the effects from a protectionist trade war. He suggested more focus on mid-career entrepreneurship as part of integrating a culture of lifelong learning into the U.S. workforce. Mr. Wadhwa said, in particular, that training or experience in how to start firms, initial financing resources, and dealing with fear of failure would help spur U.S. job creation.(5)

(1) Grove, A. (2010), "How America can create jobs," Bloomberg Businessweek, July 5, p. 48.

(2) Wadhwa, V. (2010), "Why Andy Grove is wrong about job growth," Bloomberg Businessweek, July 12.

(3) Kane, T. (2010), "Andy Grove shouldn't lose faith in startups,", July 14.

(4) Altucer, J. (2010), "Andy Grove from Intel is wrong," The Wall Street Journal, July 8.

(5) Crothers, B. (2010), "Why Andy Grove is right," CNET news, July 6.


1. Mr. Grove is particularly concerned about the best policies for creating good-paying jobs in the United States. He noted there is a lot of awareness of, and thus funding going toward, starting new companies in the U.S. What does he think is a better use of the financial resources of the United States in this regard? 

* Encouraging both the Chinese and Indian governments to invest "10X" more into U.S. firms.

* Incentives to invest in large-scale projects built within the U.S., such as building batteries for electric cars

* Increasing the amount of funding to photovoltaic cells so the U.S. can have the best research

* Investing in large MNEs such as Intel to encourage them to create jobs in the U.S.

* Working with the Chinese to combat the 10X factor of labor wage disparity

2. In a counterargument to Mr. Grove's position, Tim Kane wrote in Forbes that despite the number of manufacturing jobs being 50 percent below the peak in 1979, this is not a big problem for the economy because U.S. industrial production numbers are actually near record highs. Why else did Mr. Kane think the focus on small business startups is appropriate, and so did not agree with Mr. Grove? 

* Small businesses have been more creative than larger ones over the past two decades.

* A report showed startup firms created 3 million jobs, while established firms reduced U.S. jobs by 1 million.

* Large firms are self-sustaining and don't need additional funding to create jobs when the demand is higher.

* Small businesses are more likely to keep jobs in the U.S. than are large MNEs.

* Large businesses need to focus on global issues, while startup firms invest in the local community.

3. Another differing viewpoint is offered by Vivek Wadhwa. Mr. Wadhwa agreed with Mr. Grove that a bigger focus on creating U.S. jobs would be a good thing. But he disagreed with Mr. Grove's proposed solution. What was Mr. Wadhwa's main concern about Andy Grove's proposal to create incentives for large-scale projects? 

* He argued that most U.S. blue-chip companies will be the first to suffer the effects from a trade war.

* Large businesses need to focus on global issues, while startup firms invest in the local community.

* Mr. Grove is perhaps biased by his long experience with Intel to favor large firms over small ones.

* Mr. Wadhwa supports a smaller government and does not want to see any new taxes created.

* A report showed startup firms created 3 million jobs, while established firms reduced U.S. jobs by 1 million.

4. Mr. Grove's argument is to provide additional incentives to U.S. firms for domestic investment in more mass production. If implemented, this would have the largest impact on firms using which of the four integration-responsiveness strategies?

* Transnational strategy because such incentives help differentiation.

* Multi-domestic strategy because incentives would increase global responsiveness.

* Global-standardization strategy because incentives would lower domestic costs.

* International strategy because these incentives would reduce pressure for responsiveness globally.

* Global-standardization strategy because incentives align with the death-of-distance.

5. Rolex is a prestigious Swiss watchmaker and makes the most well-known wristwatch brand in the world. Because of the high demand for quality and precision, as well as the precious metal/materials used in the watch, Rolex does not focus on either cost reduction or local responsiveness. Given this, what global strategy is Rolex using? 

* A globalization hypothesis strategy

* A transnational strategy

* A global-standardization strategy

* An international strategy

* A multi-domestic strategy

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