Part I of Figure 11.8illustrates experience curves for the Age of Exuberance. During the 1950s and 1960s, MNCs, primarily U.S.-based manufacturing companies, were operating at full capacity. These companies were enjoying a sharp decline in their experience curves due to ever-increasing outputs. Below the overall experience curve the exhibit shows three constituent curves:
- The inputs experience curve
- The process experience curve
- The outputs experience curve
All of these experience curves were downward sloping. The more output the plants produced, the more efficient production became, the more knowledgeable procurement, personnel, and money managers became, and the more experienced inventory, sales, distribution, and logistics managers became.
In this situation the ideal organization structure was rather obvious. A company confronted with a large homogeneous market (such as Western Europe, with its predictable demand for mostly capital goods at the beginning and consumer goods later on) that is growing rapidly and predictably is going to have a few large plants, preferably at home.
Thus the MNCs of the 1950s developed an export department first and an international division later. This organization structure is, of course, ideal for a situation in which expectations are frequently fulfilled and give rise to ever higher expectations.
At the beginning of the sixties, governmental policies began to make investment overseas irresistible for most u.s. managers. First England became the host to u.s. investment, and then all of Europe was invaded. In 1966, a French journalist, J. Servan-Schreiber, suggested that Europe was about to become a colony of the world's third power, the u.s. MNC. 1
Intoxicated by highly successful overseas operations, U.S. MNC managers set up plants all over the world, replicating the physical and organizational designs of plants in Peoria and Detroit. The European MNCs essentially mimicked their American counterparts.
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