Multinational Manufacturing, Chapter 4, PDF

Chapter 4 -Manufacturing 4.1 Multinationals and manufacturing Multinational strategies have figured prominently in nearly all of the world's most dynamic manufacturing industries since the late nineteenth century. The firms that pioneered the capital- intensive technologies of the Second Industrial...

Chapter 4 -Manufacturing 4.1 Multinationals and manufacturing Multinational strategies have figured prominently in nearly all of the world's most dynamic manufacturing industries since the late nineteenth century. The firms that pioneered the capital- intensive technologies of the Second Industrial Revolution of the late nineteenth century rapidly expanded into international markets.Following is industry: Chemicals automobile Electricals Machinery producers The post-World War II successors industry is in :- computers pharmaceuticals Telecoms 4.2 Origins and growth 4.2.1 Overview There appears to have been no case of multinational manufacturing before the nineteenth century. The first instances appeared during the 1830s. Among the pioneers were Swiss cotton firms, which built plants in neighboring southern Germany. These investments, like many of the earliest attempts, were short-lived, but mid-century saw direct investments in manufacturing which were more durable. ❖ During the 1850s Siemens and Halske(German Firm) which pioneered the development of telegraph and cable equipment. ✓ Established workshops in St. Petersburg, Russia and London, England to install and maintain products manufactured in Berlin. ✓ In 1863 the company went further, and built its own cable factory near London, designed to ensure independence from the prices and quality of existing suppliers. ❖ Singer,the sewing machine company ,has been regarded as the first successful US multinational manufacturer. By 1914 it had built an extensive international business (see Box 4.1).  ✓ Singer had become the largest manufacturer of sewing machines in the world, and it opened its first foreign factory in Glasgow, Scotland. ✓ Singer has tge largest sewing machine factory in the world. There were other factories in Canada, Austria, and Germany, and in 1901 a Russian factory was opened outside Moscow Multinationals were active primarily in the products which developed during the Second Industrial Revolution rather than the First. By the end of the nineteenth century textiles still accounted for around two-fifths of total British exports, with iron and steel and machinery accounting for a further one-fourth. These were the products in which the United Kingdom held a comparative advantage in the world economy. Yet the British firms in these industries undertook almost no FDI, in contrast to their counterparts in branded consumer products, cotton thread, tyres, and artificial silk. Multinational manufacturing developed in industries in which technology, brands, and product differentiation were key features. 4.2.2 Chemicals and machinery The late nineteenth century saw remarkable developments in the chemical industry, associated with the application of scientific research to industrial processes.Thousands of new products were invented ✓ The German chemical companies grew as large managerial enterprises which made long-term investment in research and production. ✓ In artificial dyestuffs the total value of the production of the eight German firms (including their foreign subsidiaries) amounted to three-fourths of total world production in the 1900. ✓ German firms were vigorous exporters of their new products, but they also invested abroad on a substantial scale: The leading German dyestuffs firms, BASF, Bayer, and Hoechst, established their first foreign subsidiaries in Russia and France in the 1870s and 1880s, followed later by the United States and Britain. ❖ Bayer, the largest firm, had taken a minority interest in a US manufacturing company in 1871, and although this particular investment was later disposed of, Bayer became a substantial manufacturer in the United States. ❖ In 1914 Bayer owned three of the seven dyestuff plants in the United States, and it also manufactured there the new pharmaceutical products which it had developed, notably aspirin  ✓ The German companies supported their manufacturing operations in the United States with extensive nationwide sales organizations. ✓ In Russia, five German manufacturers established six dyestuffs factories which accounted for around 80 percent of the German dyes sold on the Russian market in 1913. Pharmaceutical Bayer and Hoechst had large pharmaceutical operations, but there were also specialized German pharmaceutical firms which went abroad before 1914. E. Merck began manufacturing pharmaceuticals (including morphine, codeine, and cocaine) in the United States in 1899, and started production in France in 1912. Further, FDI was undertaken by the leading German electrochemical firms, such as Degussa, the largest German producer of cyanides by the electrolytic process. By 1914 this firm's US subsidiary had four manufacturing plants in operation producing a variety of cyanides, bleaching agents, sodium, and chloroform. Among non-German firms in chemical industry : The first Swiss chemical FDI occurred in 1882 when a dyestuffs firm built a small factory near Lyon, France to supply the textiles industry. Ten years later this factory was sold to another Swiss firm, Geigy, which had already begun manufacturing in Russia in 1888. By 1914 Geigy, Ciba, and Sandoz had small-scale manufacturing in the United States, Britain, France, and Germany. Swiss pharmaceuticals manufacturer Hoffmann La Roche had opened a factory in Britain in 1909 The Belgian chemical firm Solvay & Cie also developed a large multinational business to exploit its invention of a continuous process to make caustic soda, which was used in the manufacture of glass, textiles and other chemicals. In contrast, the US manufacturers of industrial chemicals and pharmaceuticals rarely ventured beyond their home market before World War II. Meanwhile, British chemical firms lagged in technology, and had no basis on which to expand abroad Machinery Industry US-based companies became prominent international investors in machinery industry compare their role in chemical industry. US based companies pioneered the mass production of machinery by fabricating and assembling interchangeable parts, and as a result US firms became world leaders in many products. ✓ Otis Elevator became the first worldwide producer of lifts, with factories in Britain, Germany, France, and Canada by 1914. ✓ National Cash Register became the world's first-mover in cash registers, and had factories in Germany and Canada by 1914. Branded consumer goods Multinational manufacturing was found in many branded consumer goods by 1914. British companies manufactured dog food and toffee in the United States, and marmalade in Germany. A German firm manufactured malt coffee—a cheap coffee- substitute made from barley—in Austria, Sweden, Russia, and Spain. US, British, and German multinationals made gramophone machines and records all over Europe, as well as in India, Brazil, and Argentina gramophone machines later called phonograph/record player. The predecessors of two of Europe's largest consumer goods firms—Nestlé and Unilever—already had substantial multinational investment by 1914 Nestlé originated as one of a cluster of Swiss firms producing condensed milk, baby food, and chocolates. The Anglo-Swiss Condensed Milk Company, which despite its name was a purely Swiss company, established a British factory to produce condensed milk in 1872, and an American plant ten years later. By 1914 the combined business manufactured condense milk and baby food products in Britain, the United States, Australia, Norway, Germany, and Spain. Nestlé also had a large shareholding in a Swiss chocolate company which manufactured chocolate in the United States and elsewhere Van den Bergh and Jurgens, the leading Dutch margarine companies, established factories in Germany and Belgium; by 1914 each Dutch firm had seven margarine factories in Germany. In Britain, the Dutch companies invested in distribution, forming relationships with retailing groups which led, by 1914, to the acquisition of full control over several chains of retail shops. Lever Brothers,the British predecessor to Unilever, erected or purchased soap factories in numerous countries between 1890 and 1914, in several of which it controlled multiplant operations. Significance by 1914 The interwar followers During the interwar years manufacturing firms went to more foreign countries, and built more plants, and made more products in individual foreign countries. Yet multinational strategies became more complex. Managers had to negotiate their way through a web of exchange controls and tariffs. They often found themselves negotiating with governments. There was a growing rate of failures, and of divestments.  World War Iprod uced winners and losers among the established manufacturing multinationals. The winners included the firms owned by the European countries which had managed to stay neutral, notably Sweden, Switzerland, and the Netherlands ❖ War time profits enabled the Swedish company to buy up the entire German ball- bearing industry in the 1920s. Automobiles and food in the interwar years Automobiles European The automobile industry originated in France in the late 1890s, and automobile manufacture soon spread in Europe.European companies concentrated on making small numbers of expensive cars for the wealthy, but became quite active in cross-border investments. France's Renault established distribution operations in the United States and elsewhere, and built small assembly plants in Italy, Spain,Britain, and the United States. Germany's Daimler began manufacturing in Austria in 1902, Italy's Fiat built factories in Austria, the United States, and Russia before 1914 United States Henry Ford General Motor(GM) Henry Ford During the 1900s the automobile industry was revolutionized by Henry Ford in the United States with the development of a standardized product—the Model T—manufactured on a moving assembly line. Ford was able to achieve large economies of scale from production in large volume, interchangeable parts and flow production. As result, costs were dramatically less than for cars produced—as in Europe—in small batches by skilled craftsmen Economies of scale refer to the cost advantages a company gains with the increase in production General Motor During the 1920s the American industry (or parts of it) underwent further transformation, as Alfred P. Sloan undertook largescale organizational innovation at GM, which led to the development of the multidivisional organizational structure Branded Goods From the 1920s Kraft, manufacturer of dairy products and processed foods, built extensive international operations in Europe, especially in Germany and Britain. On a smaller scale, firms such as Quaker Oats, Kellogg's, Heinz, Carnation, Pet Milk, and Wrigley set up foreign production facilities, often initially in other English-speaking countries with similar market conditions. The international operations of Coca-Cola, which had originated in Atlanta, Georgia in 1886, expanded rapidly afte 1930 when the Coca-Cola Export Corporation was established to sell and promote its soft drink in all countries except the United States, Canada, and Cuba. By 1940 Coke could be purchased in seventy countries. Coca-Cola employed the same franchise system that it used domestically. The firm established its own syrup factories abroad which supplied local independent bottlers which were given exclusive licenses for their territories. World War II generated a majorgrowth momentum. European food manufacturers continued to invest across borders in the United States and elsewhere. During the 1920s Nestlé began manufacturing chocolate, and in 1938 it launched Nescafé, the soluble powder that was to revolutionize coffee-drinking habits worldwide. By that year Nestlé operated 105 plants outside Switzerland (Heer 1966). Among smaller food specialty manufacturers, the British-owned Reckitt & Colman manufactured mustard and condiments in New York Determinants Internalization Ownership Location &knowledge factors factors transer Ownership factors As in natural resources, entrepreneurial ability was often a decisive advantage. It was rarely the inventors of new products who built the successful enterprises of the late nineteenth century: rather it was the entrepreneurs who matched inventions with investment.  creation of large corporations with managerial hierarchies provided new types of ownership advantages for firms in the new capital-intensive, technically advanced and fast-growing industries of the late nineteenth century. These firms developed the capacity to create knowledge, and they invested in the organization required to exploit this knowledge commercially 1. German firms became leaders in the commercialization of scientific research, as chemical and pharmaceutical firms such as Bayer built corporate research laboratories which developed a stream of new products. 2. In the United States, GE's research laboratory was created in 1901, and undertook pioneering research in lighting, vacuum tubes, X-rays, and other products. The laboratories of GE were responsible for a remarkable number of innovations in electricals, communications, and even chemicals during the interwar years In branded and packaged consumer products ownership advantages were often derived from skills in marketing, especially branding, advertising and product differentiation. Homogeneous products such as soap were turned into intangible assets by brand names. The names of manufacturers such as Kellogg or Heinz became brands in themselves. These brands lay at the heart of the competitive advantages of firms Access to capital was important. British free-standing companies benefited from the relative cheapness of capital and the ease of raising funds on the well-developed London capital market In Continental European countries where the ties between banks and industry were close, banks facilitated multinational manufacturing.(not capital market) In Sweden, Germany, and Switzerland the role of banks in financing the international expansion of companies was an important, if passive, factor In the 1920s the small size of the German capital market and high interest rates may have constrained German firms to raise capital to undertake FDI, but larger enterprises were able to raise considerable sums by issuing long-term debentures on foreign capital markets. Foreign subsidiaries were used to finance foreign investments, especially after the introduction of German exchange controls Locational factor Most important locational factor which encouraged manufacturing firms to exploit their ownership advantages abroad through FDI rather than exporting was tariffs A number of nontariff barriers to trade stimulated manufacturing FDI. While outright government restrictions on foreign multinationals were few before the 1920s, national feelings sometimes led governments to favor local producers, or else led foreign companies to undertake local manufacture in order to appear as national enterprises. Nationalistic pressures intensified in the interwar years. ✓ GE(General Electric) took shares in local electrical companies in recognition of the growth of national feelings and hostility to foreign products. Some governments put foreign companies under direct pressure to manufacture locally. Patent legislation also influenced the choice between exporting and FDI. ✓ US electrical FDI in Canada was stimulated by patent legislation which stipulated that patents were null and void if not worked within two years of issuance, while imports also nullified patents. ✓ After British patent law was modified in 1907 to prescribe that a foreign patent, after its transfer to Britain, had to be exploited there or else be revoked, German dyestuffs firms established plants in that country The overall size and per capita income of markets ✓ While protectionism stimulated FDI in the United States, companies were drawn to the most fast-growing and largest market in the world ✓ Producing in a market gave firms greater sensitivity to local tastes, and a better ability to respond quickly to market needs. Local production also offered one of the most effective responses to competitors based in major markets. Internalization and knowledge transfer During the nineteenth century manufacturers experimented with different means to exploit their knowledge across borders. Failure to ensure security for business in outside bounder leads to firms internalize their resources.Singer cases is example why firm prefer to choose internalize process. Singer Case: 1. After the invention of the sewing machine in the 1850s, Singer first attempted to exploit the invention outside the United States by licensing. 2.. A licensing agreement was made with a French company in 1855 under which Singer sold its French patent to an independent French merchant in return for cash and the payment of a royalty. The French firm declined to pay Singer all its fees, handled competitive sewing machines and declined to disclose information on sales. 3. Singer never again sold a patent to an independent business. When the French firms' patent from Singer expired in the 1870s, Singer went into direct competition with it using its own marketing company Licensing agreements may increase the transactions costs with the misuse or dissipation of property rights whenever they cannot be fully protected through a contract or where the litigation procedure is costly or ineffective. Second Industrial Revolution industries involved new technologies and processes. In most cases there were no firms in foreign countries to license these technologies to. The prevailing condition of transport and communications also made it difficult or impossible to disaggregate different parts of th The reason why multinational investment was especially prominent in the industries of the Second Industrial Revolution rather than the First was the complexity of writing contracts for complex technologies and for brand names Transactions costs can often explain the changing modes used by multinationals to operate in foreign market, The agency often involved high transaction costs in terms of enforcement by the principals, as many agents sought large discounts or were inefficient in various ways. Such problems led firms to replace agents with selling companies ( The Interwar cartels By the 1930s a considerable proportion of world manufacturing was controlled by international cartels.A number of characteristics of the period encouraged this trend : ❖ depressed market conditions ❖ growing political risk ❖ exchange controls Interwar European governments often supported the spread of cartel agreements. International cartels proliferated in industries where there were a relatively small number of producers, especially those manufacturing semi-finished products and capital goods, including engineering, iron and steel, and chemicals. The larger the number of firms in an industry, and the greater the variety of products, the greater were the problems faced by organizers of cross-border collusive agreements(eg textiles with larger numbers of producers,fast growing industries such as automobiles)  Types of cartels 1. The ‘classic’ interwar cartel was concerned with price and output Common type of price agreement permitted each national group of producers to decide the price to be charged in their home market, prices which were followed by exporters to that market. The international cartels in matches and electric lamps were of this type. 2. Involved the fixing of export prices for a market or several markets common in steel products Cartels designed to restrict the quantity or value of sales There often featured sales or export quotas, expressed as a percentage of total sales or exports. It was common for home markets to be reserved entirely, or in part, to the nationals of that market some cases foreign firms were allowed to supply particular markets to the extent of a certain proportion of home consumption—and these supplies could either come from imports from the parent or from its own production subsidiaries in that market. However, some cartels, for example, in wire products, specifically prohibited FDIi n specified markets. 3. Many international cartels divided up sales territories. classic formulation would be for the British participant to be allotted the British Empire market, and the American firm the North American market, leaving the German participant with Continental Europe. The wide-ranging agreements in the interwar chemical industry between ICI, Du Pont and IG Farben took this form. In some industries patent agreements were an important feature of the international cartel system. This was the basis of the relationship between Du Pont and ICI which provided for the sharing of know-how and R & D results.  Cartel administrative Given that a central preoccupation of cartels was to prevent cheating and opportunistic behavior by members, it was not surprising that the majority of cartel agreements provided for sanctions. Fines were imposed for companies exceeding quotas, and compensation was paid for underselling or underproduction. Sometimes compensation payments were available to manufacturers which refrained from extending capacity. The administration of cartels was sometimes handled by representatives from the member corporations, who implemented the decisions made at regular meetings of members' representatives. ❖ This system was more effective for straightforward matters such as setting minimum price levels, than for when more complex arrangements were being administered. In such cases, separate companies were sometimes formed, independent from the member companies, to provide the administration. There were also cases when joint sales organizations were established, which collated orders and distributed them among member corporations.The more highly organized cartels placed their headquarters in small European states such as Switzerland, Belgium, Luxembourg or Liechtenstein, both to avoid scrutiny from governments and to take advantage of more liberal company laws. Drawback and dissolvement of cartel system: World War II massively disrupted the international cartel. ❖ It severed the long-standing relationships which had existed between German firms and their US and British counterparts. ❖ The importance of German firms in the cartel system linked it in the public mind to the Nazi war machine. This was one factor behind a resurgence of aggressive US antitrust policies against cartels after the war had ended. series of major antitrust actions in the United States against US companies active in international cartels. ❖ Even non-US companies faced the risk of being taken before US courts if they had any agreement with a US corporation, even if it did not affect the United States itself. 4.5 Renewal and growth 4.5.1 Overview From the 1950s the growth of manufacturing FDI resumed. International cartels were dismantled in most industries. United States Market ❖ US-owned firms became pre-eminent in multinational manufacturing. They invested abroad in a range of products, though machinery, chemicals, transportation equipment, food products, and primary and fabricated metals were especially important. ❖ US companies were the world's technological innovators in many industries. They were the leaders in capital- and technology-intensive production methods. The United States became the world center of innovation—in 1967 the United States accounted for almost 70 percent of the R & D undertaken in the OECD—and US industrial productivity  European Market ❖ European manufacturing FDI was initially more muted. British and Dutch firms were the most active in manufacturing abroad. British companies were especially strong in food, drink, and tobacco. o British since the interwar years they had a strong bias towards investing in the developed Commonwealth markets of Canada, Australia, New Zealand, and South Africa. o In the case of the Netherlands, a small group of large firms (the first two of them AngloDutch)—Shell, Unilever, Akzo, and Philips—accounted for most of the large amount of FDI in chemicals, petroleum, electrical engineering and food products. ❖ In contrast, the manufacturing firms of many other European countries, including France and Germany, undertook comparatively little multinational investment until the 1970s, preferring to use export strategies to take advantage of the fast world trade growth and the opportunities offered by European economic integrationIt was only during the 1970s that French and German manufacturers began to engage in FDI on a substantial scale. ❖ The focus of much of the multinational investment which took place in the three decades after World War II concerned US firms investing in Europe. o In soap and detergents, from the 1950s Procter & Gamble (P&G) invested in France, Belgium, the Netherlands, Germany, and elsewhere in Europe. o P&G had only invested in Canada an]d Britain before 1945. This was a highly concentrated industry: Unilever, P&G, Colgate, and Henkel accounted for 60 percent of world sales of soap and detergents during the 1960s. The position of these firms  Japan Market ❖ Japanese manufacturers also rebuilt their businesses after the destruction of World War II, primarily using export strategies. ❖ After Japan re-entered the world economy in 1949, there was a rapid growth of exports—four- fifths of which were manufactured goods by the mid-1950s. In 1950, half of Japanese exports were textile products, but by 1975 this had fallen to 5 percent, as machinery and transport equipment became the leading exports. ❖ The fixing of the exchange rate at Yen 360/US $1 between 1949 and 1972 helped to create this growing export competitiveness. ❖ The success of Japanese exports provoked a wave of ‘new protectionism’ from the 1970s o As the US trade deficit mounted, US administrations became involved in growing trade disputes with Japan. The United States pursued ‘orderly marketing agreements’ in sectors such as textiles, automobiles, and electronics. o As in the past, trade restrictions encouraged multinational investment. There was an immediate upsurge of Japanese FDI in the electronics and automobiles industries (Encarnation 1992). Subsequently the growth of European import restraints—and Japanese concerns about being excluded from integrated European market being created by the Single European Market project after 1985—also stimulated Japanese FDI into European manufacturing (Strange 1993) o. Meanwhile, the success of the postwar Japanese economy in rising real incomes also raised labor costs. Combined with the revaluation of the Japanese Yen after 1972, Japanese manufacturers began to shift assembly and lower-value added processes to offshore plants in the developing world, especially in Southeast Asia 4.5.2 Chemical and automobile The postwar decades saw a sharp expansion of world markets for chemical products: the growth of demand for chemical products has consistently exceeded overall rates of growth in the developed world. The interwar preference for cartels was abandoned in favor of large-scale multinational investment Petrochemicals An industry which developed in the interwar years out of the technological convergence of the oil and chemical industries. Initially it was an almost exclusively US industry: in 1950, 98 percent of world production of ethylene, a key petrochemical product, was located in the United States. Subsequently, the petrochemicals industry grew exponentially with surging demand from the automobile, textile and construction industries, the growing use of synthetic materials, and falling costs of petroleum raw materials. World ethylene capacity grew twenty-six-fold between 1950 and 1970. The oil companies, with their long experience of multinational operations, were initially the most active direct investors. Exxon and Shell—whose US subsidiary has undertaken pioneering research in the industry—made large-scale FDI in European petrochemical manufacture in the 1950s. They were subsequently joined by the US chemical companies, and later the major European chemical companies, which began to switch from coal to petroleum as the basic raw material for organic chemical manufacture  Chemical The new strategy of US chemical companies was evident in the case of Du Pont, whose FDI— and even exports—had been marginal to its overall business before the mid-1950s Du Pont's foreign expansion was part of a wider trend by US chemical companies to invest abroad. While Du Pont and Monsanto concentrated on plastics and synthetic fibers—or downstream operations—Union Carbide and Dow were particularly prominent in petrochemicals. British and Dutch companies such as ICI, Shell, and Akzo were initially prominent, but they were not alone. The German chemical industry, which was radically changed after the end of World War II by the breakup of IG Farben and the re-emergence of BASF, Bayer, and Hoechst as independent companies, returned to foreign production. o German firms initially reinvested in Latin America, often repurchasing plant they had lost in the war, and then invested elsewhere in Western Europe and North America The leading three Swiss chemical companies—Ciba, Geigy, and Sandoz—abandoned their cartel in 1950, partly because of US antitrust pressure on their American subsidiaries, and reverted to extensive FDI. Automobile  In the automobile industry, the scale of FDI reached unprecedented levels as rising world incomes created an everexpanding market for automobiles, while the proliferation of import barriers and local content requirements discouraged importing. United States Market Competitive struggles between the major US firms in the American domestic market were reproduced abroad. Chrysler, the third biggest US producer after Ford and GM, had almost no FDI before 1945, but thereafter perceived the need to match its two US competitors in the world market if it was to sustain its position in its domestic market. Given its late entry into multinational manufacturing, Chrysler's strategy was one of acquisition of foreign firms. By 1973 it had purchased full control over French, Spanish, and British manufacturing companies and secured control of around 7.5 percent of total Western European vehicle production. European Market The focus of non-US automobile manufacturers was initially on exports rather than direct investment. In Western Europe, there was a process of consolidation of fragmented low-volume manufacturers. German firms consolidated into Volkswagen (VW), Daimler-Benz, and BMW. The former, which focused on producing a single small car known as the Beetle, grew rapidly to become Germany's largest producer but it, like all other European producers including Renault, Peugeot, and Fiat, largely relied on exports before the 1970s. Japan market The most dramatic change in the post-war automobile industry was the rapid growth of Japanese-based manufacturers. Toyota and Nissan, Japan's two largest producers, had been founded in the interwar years, but the industry had to be rebuilt after the destruction experienced during World War II. The subsequent growth of the Japanese firms as successful challengers to the corporate giants Ford and GM provided a compelling example of how incumbents can be overturned if new entrants can generate sufficient organizational and technological competences. Over several decades Toyota developed a new production system which came to be known as ‘post-Fordist’, or ‘lean production’, and included the use of ‘just-in-time’ (JIT) systems and quality control. ❖ Instead of integrating all parts of automobile manufacture within the corporation, Toyota purchased many components from tiers of suppliers with whom close relationships were maintained. Over time, around 70 percent of the entire value of a finished car was contracted out to suppliers, a much higher figure than in the mass production system. This Toyota production system, which was eventually adopted by manufacturers worldwide, was able to deliver some of the advantages of both large size—economies of scale and scope—and those of small firms, including flexibility and entrepreneurship. ❖ Japan's share of world automobile output rose from 1 percent to 25 percent between 1960 and 1990, while the share of the United States fell from 50 percent to less than 20 percent. During the 1970s the Japanese automobile companies penetrated the US and European markets, benefiting from an increased demand for small cars which US manufacturers were too slow to meet. ❖ Before 1982 there was not a single Japanese automobile production plant outside Japan, but this changed after the US government imposed a Voluntary Export Restraint (VER) whereby the Japanese government ‘voluntarily’ agreed to prevent Japanese car makers from increasing exports to the United States. Honda, which had a relatively small domestic market share in Japan compared to Nissan and Toyota, and insufficient quota allocation under the VER, responded by building a motorcycle plant at Marysville, Ohio. An automobile plant was established adjacent to this, which produced its first car in 1982.  Japanese companies controlled around one-third of the US car market. The ‘big three’ US producers were turned into a ‘big five’, comprising GM, Ford, Chrysler, Honda, and Toyota. By 1990 more than 300 Japanese or joint venture automotive parts suppliers had also been established to supply parts to transplant auto assemblers in the United States In South Korea, the government selected large domestic conglomerates known as the chaebol to develop an automobile industry 4.5.3 Electronics US companies were pre-eminent in the new and fast-growing electronics industries. The first companies to appreciate the opportunities for the commercial applications of computers were business machinery firms, including IBM, National Cash Register (NCR), and Remington Rand, whose origins dated back to the nineteenth century. IBM, National Cash Register (NCR), and Remington Rand, whose origins dated back to the nineteenth century. These companies benefited from the huge wartime demand for typewriters, adding and calculating machines and punched card tabulators, which were the contemporary tools of data management and processing. The US government became the largest customer in the world for such equipment, and its funding and encouragement of specific types of research—held to be essential for national security—led directly to the development of electronic digital computers, and miniaturized electronics. Later the sheer size of US industry—as well as its readiness to accept the new technology—created a formidable non-military domestic market. Remington Rand developed the first computer designed for business use, the Univac IBM's subsequent recognition of the importance of electronics for the data processing industry resulted in the firm undertaking massive investment in research and production. By 1958 IBM had secured a predominant position in the US market, accounting for over 80 percent of the nearly 6,000 computers installed in that year. In the face of a proliferating number of incompatible computers, IBM's strategy focused on the creation of a single family of compatible computers which would enable it to reach as wide a commercial market as possible by utilizing the cost advantages of the economies of scale. During the 1980s, the electronics industry was further transformed by the development of the personal computer (PC), which had first appeared in a primitive form in the previous decade. In 1981 IBM launched its own PC, and took the decision to outsource both its disk operating system and its microprocessor to two new firms, Microsoft (founded in 1975) and Intel (founded in 1968). IBM rapidly became the industry leader in PCs and established the Microsoft/Intel combination as the industry standard, but because IBM did not have exclusive rights to their components, Microsoft and Intel were able to sell their proprietary technologies to manufacturers of IBM ‘clones’ such as Compaq and Dell. In contrast, Intel and Microsoft's capabilities were protected by copyright and other measures. The Microsoft/Intel combination became the entrenched industry standard. Intel became the world's largest producer of microprocessors, while Microsoft acquired a near monopoly in personal computer operating systems after launching Windows 3.0 in 1990 and Windows 95 in 1995. Bundled into the latter was the Microsoft Explorer 2.0 browser for the emergent Internet, which had shortly before become available for commercial use.