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End of the Line: The Rise and Coming Fall of the Global Corporation
In September 1999, an earthquake devastated much of Taiwan, toppling buildings, knocking out electricity, and killing 2,500 people. Within days, factories as far away as California and Texas began to close. Cut off from their supplies of semiconductor chips, companies like Dell and Hewlett-Packard began to shutter assembly lines and send workers home. A disaster that only a decade earlier would have been mainly local in nature almost cascaded into a grave global crisis. The quake, in an instant, illustrated just how closely connected the world had become and just how radically different are the risks we all now face.
End of the Line is the first real anatomy of globalization. It is the story of how American corporations created a global production system by exploding the traditional factory and casting the pieces to dozens of points around the world. It is the story of how free trade has made American citizens come to depend on the good will of people in very different nations, in very different regions of the world. It is a story of how executives and entrepreneurs at such companies as General Electric, Cisco, Dell, Microsoft, and Flextronics adapted their companies to a world in which America’s international policies were driven ever more by ideology rather than a focus on the long-term security and well-being of society.
Politicians have long claimed that free trade creates wealth and fosters global stability. Yet Lynn argues that the exact opposite may increasingly be true, as the resulting global system becomes ever more vulnerable to terrorism, war, and the vagaries of nature. From a lucid explanation of outsourcing’s true impact on American workers to an eye-opening analysis of the ideologies that shape free-market competition, Lynn charts a path between the extremes of left and right. He shows that globalization can be a great force for spreading prosperity and promoting peace—but only if we master its complexities and approach it in a way that protects and advances our national interest.
End of the Line is the first real anatomy of globalization. It is the story of how American corporations created a global production system by exploding the traditional factory and casting the pieces to dozens of points around the world. It is the story of how free trade has made American citizens come to depend on the good will of people in very different nations, in very different regions of the world. It is a story of how executives and entrepreneurs at such companies as General Electric, Cisco, Dell, Microsoft, and Flextronics adapted their companies to a world in which America’s international policies were driven ever more by ideology rather than a focus on the long-term security and well-being of society.
Politicians have long claimed that free trade creates wealth and fosters global stability. Yet Lynn argues that the exact opposite may increasingly be true, as the resulting global system becomes ever more vulnerable to terrorism, war, and the vagaries of nature. From a lucid explanation of outsourcing’s true impact on American workers to an eye-opening analysis of the ideologies that shape free-market competition, Lynn charts a path between the extremes of left and right. He shows that globalization can be a great force for spreading prosperity and promoting peace—but only if we master its complexities and approach it in a way that protects and advances our national interest.
224 pages, Kindle Edition
First published August 16, 2005
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Displaying 1 - 4 of 4 reviews
June 18, 2017
Neither Cisco Systems, which dumped its manufacturing, nor the upstart startup, Cerent, which used contract manufacturing from its beginning, were vertically integrated. These two companies became and started out, respectively, as new corporations of the coming 21st century of globalization. Barry Lynn, in End of the Line, does a masterful job about describing the globalization of American business.
I especially enjoyed chapter 5, which was, in some respects, an “extension” of my book, The Upstart Startup: How Cerent Transformed Cisco. In End of the Line, Lynn describes Chamber’s business innovation to outsource work, from manufacturing to engineering. He writes, “Chambers’s purpose was never to promote the Internet as an Esperanto-like forger of global togetherness and understanding. Rather, his aim was simply to grow his company fast enough to dominate an industry that was expanding far more rapidly than almost any industry ever before.”
Indeed, Cisco Systems took both Lucent (the former Western Electric) and Nortel Networks head on in the telecommunications market segment. Lynn adds, “Like General Electric with its lightbulbs and wires and turbines more than a century previously, Cisco’s challenge was to get its new technology into as many markets as possible before any competitor could launch an attack.”
The late 1990s defined the emergence of the new global marketplace where, to become successful, a manufacturer had to “win all the world at once.” Indeed, John Chambers used to say that Cisco had to become number 1 or number 2 in every market segment it targeted, otherwise, the company would abandon that segment.
Cisco’s success required its use of “an audacious acquisition strategy, gobbling up smaller companies filled with technologies and engineers and skilled managers.” Lynn adds that Cisco also developed an approach for manufacturing under Carl Redfield that, outsourced its manufacturing “as an effort to make use of the capital investments of other firms while devoting its own resources to buying and integrating and marketing.” Lynn underscores a key point about the company’s strategy, “Cisco turned the task of manufacturing over entirely to others so it could concentrate more single-handedly on capturing near-absolute control of a brand new market.”
Optical transport was one of these new markets Cisco tackled in 1999 and its Cerent acquisition provided the company with the technology and team to attain a number 1 position in the North American optical transport segment almost immediately.
Why did Cisco outsource its manufacturing capability so aggressively?
Lynn looks at the data and comes up with the answer: “By 2000, some 90 percent of Cisco’s subassembly work took place outside the company, as Cisco managers kept control only of high-end, developmental production work. This work took place in thirty-four plants around the world, only two of which were owned by Cisco. Of all the people who worked to build Cisco-branded products, only 15 percent were Cisco employees. The reason for such a wholesale outsourcing was not hard to figure out. In 2000, Executive Vice President Carl Redfield estimated that turning manufacturing over to outside contractors each year cuts Cisco’s production costs by between $900 million and $1.3 billion.”
The pro-competitive business environment allowed Cisco to pursue its strategy in the 1990s. “Given the existence of a robust base of suppliers and small innovators,” Lynn writes, “Cisco decided to cut loose from the parts of its business that were most difficult to expand organically – namely manufacturing and R&D.”
Concurrent with this direction, “Cisco adopted a strategy of acquiring a closely related set of products” in order to fuel the company’s growth. He adds, “The result was that managers, over the course of five years and on a global scale, were able to capture for their company the de facto title of General Internet.” Cisco’s 26th acquisition, Cerent, as listed on Cisco’s website, fit both of these criteria and so it was a no-brainer for the Internet giant to acquire this upstart startup.
For the whole story about Cisco and its like-minded “outsourcers” and the role Cerent played to help Cisco succeed, I urge you to read both Lynn’s book and my book.
Keep on reading!
I especially enjoyed chapter 5, which was, in some respects, an “extension” of my book, The Upstart Startup: How Cerent Transformed Cisco. In End of the Line, Lynn describes Chamber’s business innovation to outsource work, from manufacturing to engineering. He writes, “Chambers’s purpose was never to promote the Internet as an Esperanto-like forger of global togetherness and understanding. Rather, his aim was simply to grow his company fast enough to dominate an industry that was expanding far more rapidly than almost any industry ever before.”
Indeed, Cisco Systems took both Lucent (the former Western Electric) and Nortel Networks head on in the telecommunications market segment. Lynn adds, “Like General Electric with its lightbulbs and wires and turbines more than a century previously, Cisco’s challenge was to get its new technology into as many markets as possible before any competitor could launch an attack.”
The late 1990s defined the emergence of the new global marketplace where, to become successful, a manufacturer had to “win all the world at once.” Indeed, John Chambers used to say that Cisco had to become number 1 or number 2 in every market segment it targeted, otherwise, the company would abandon that segment.
Cisco’s success required its use of “an audacious acquisition strategy, gobbling up smaller companies filled with technologies and engineers and skilled managers.” Lynn adds that Cisco also developed an approach for manufacturing under Carl Redfield that, outsourced its manufacturing “as an effort to make use of the capital investments of other firms while devoting its own resources to buying and integrating and marketing.” Lynn underscores a key point about the company’s strategy, “Cisco turned the task of manufacturing over entirely to others so it could concentrate more single-handedly on capturing near-absolute control of a brand new market.”
Optical transport was one of these new markets Cisco tackled in 1999 and its Cerent acquisition provided the company with the technology and team to attain a number 1 position in the North American optical transport segment almost immediately.
Why did Cisco outsource its manufacturing capability so aggressively?
Lynn looks at the data and comes up with the answer: “By 2000, some 90 percent of Cisco’s subassembly work took place outside the company, as Cisco managers kept control only of high-end, developmental production work. This work took place in thirty-four plants around the world, only two of which were owned by Cisco. Of all the people who worked to build Cisco-branded products, only 15 percent were Cisco employees. The reason for such a wholesale outsourcing was not hard to figure out. In 2000, Executive Vice President Carl Redfield estimated that turning manufacturing over to outside contractors each year cuts Cisco’s production costs by between $900 million and $1.3 billion.”
The pro-competitive business environment allowed Cisco to pursue its strategy in the 1990s. “Given the existence of a robust base of suppliers and small innovators,” Lynn writes, “Cisco decided to cut loose from the parts of its business that were most difficult to expand organically – namely manufacturing and R&D.”
Concurrent with this direction, “Cisco adopted a strategy of acquiring a closely related set of products” in order to fuel the company’s growth. He adds, “The result was that managers, over the course of five years and on a global scale, were able to capture for their company the de facto title of General Internet.” Cisco’s 26th acquisition, Cerent, as listed on Cisco’s website, fit both of these criteria and so it was a no-brainer for the Internet giant to acquire this upstart startup.
For the whole story about Cisco and its like-minded “outsourcers” and the role Cerent played to help Cisco succeed, I urge you to read both Lynn’s book and my book.
Keep on reading!
December 20, 2017
If you're looking to read a succinct history of America's economic turn toward globalization and its role in the decay of our cultural and political fortunes, this is a good place to begin the journey. The book's core argument is that the intertwining of American industry so closely with other nation states has made our economy more unstable. Lynn makes heavy use of case studies, breathing, well known companies, and how their behaviors and practices exemplified aspects of negative globalization, nearly all operating out of mantra run amok: that the rights of the shareholders and raw profits trump all other considerations combined. I am not an economist, and frankly, have always found many economic studies extremely challenging and overly abstract for my brain to process. While Lynn's work is not particularly lively, it is straightforward and clear. Its implications are devastating. While the book is now a decade old, a lot of what he discusses seems prescient and quite relevant today.
January 20, 2008
The tone of this book was so pessimistic it was difficult to take this author seriously in any regard. There are some very real concerns that they bring up, but it honestly lost a lot of its impact due to their tone.
July 26, 2009
Primitive proposition. Narrow minded.
Displaying 1 - 4 of 4 reviews