Helsinki Congress of the International Economic History Association, 21-25 August 2006: Session 93 Equipment goods and mass brands American business spreading modernity into France? Strategies



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Helsinki Congress of the International Economic History Association, 21-25 August 2006: Session 93
Equipment goods and mass brands American business spreading modernity into France? Strategies, identity and perception (from the 1940s to the 1980s)
Hubert Bonin, professor of economic history at the Institut d’études politiques de Bordeaux (Centre Montesquieu d’histoire économique-Bordeaux 4 University) [h.bonin@sciencespobordeaux.fr]
This text is only the first draft of a study which is developed for the Helsinki conference of August 2006, but which will be supplemented for the future proceedings.

[version at the date of 3 august 2006]



In 1982, a report on some of the leading businesses of the world was entitled: “The American supremacy”1 right beside an editorial which proclaimed: “The European decline”2. The return of the Japanese business giants in many industrial sectors is still in the process of maturation and the American hegemony seems, at the moment, to be complete. The year before last saw François Mitterrand, leader of the Left socialist party winning the presidency of France by advocating the nationalization of some forty businesses and declaring that only through such a nationalization drive France could avoid falling prey to the rapacious multinational corporations, in particular, the American giants. Such a “perception” of the national economical interests could now seem to be outdated, as it was moulded by the awe of an erstwhile all-powerful America and does not take account of the lacunae which have begun to shake the balance of the world’s production system and the doubts which have been gnawing, for the past several years, at the actual economic clout of the United States. But until the advent of this Great Crisis of the 1970s-1980s, the American presence in France had both geopolitical and geo-economic dimensions: it was a question of the country’s independence.
On the other hand, in order to avoid the dangers of closing ourselves off into a self-defeating autarky, which would be detrimental to both productivity and competitiveness, France needed to remain open to the American technological influence, especially as the us had become, for almost a century, synonymous with technological innovation. From as early as the end of the 19th century, a number of studies3 have dealt exhaustively on the fascination generated by the “progressive American civilization”, especially as demonstrated by the large American presence at the Universal Exhibitions of Paris in 1889 and 1900 and the Universal Exhibition held at Chicago in 1893. Along with their German competitors, they were thought to have been the driving force behind the second industrial revolution. And as this last progressed from strength to strength, it reinforced the Americans’ image as world-class innovators. The following decades also saw “Americanism” take root in the global psyche while the transfer of American technology, American ideas and an American mentality grew exponentially. We all know how the famous “productivity missions” under the aegis of the Marshall Plan brought millions of technicians and engineers on guided tours of American factories to learn the latest organizational techniques. In October 1949, two of the very first missions toured General Electric, Westinghouse and Bud & MacCormick in Philadelphia, Baltimore and Pittsburgh respectively. But this “Americanization” of American companies is well known4. In this text we shall investigate how and why the power of American companies penetrating France was perceived by the State, the opinion and the press, and such a drive for “multinationalisation”5 has affected the country. We need to be clear of what these pioneering books6 have to say and to grasp “the secrets of the American giants” – “The American enterprise […] can it be acclimatized to France?”7 We shall investigate the role played by France in forming the American corporate strategy – being overseas, did it constitute a specific market, with its rising standard of living and its booming economy fuelled by the growth of its consumer base and the strengthening of its industrial and transportation infrastructure? Did it also facilitate entry into the vast market represented by the European Economic Community which was then on the verge of being constituted? In the same vein, we could also investigate the reasons behind the assumption of its importance vis-à-vis the traditionally favorite targets of American investments: the United Kingdom, the West-Germany and the Benelux countries. We will try and consolidate a chronological and sector-wise table of the cash inflows and corporate initiatives in the post-war period, during the period of expansion (the 1950s) and its culmination in the 1960s-1970s. We shall try and identify the tactics employed by American corporations to facilitate their incursions and eventual establishment in France by looking at the legal and financial aspects of this penetration: alliances, partnerships, simple license transfers, direct industrial investments, subsidiaries, etc. We shall also evaluate the position reached by the entities thus constituted and developed in France within the framework of the international division of organized labor at the European scale, in order to assess their capacity to assume the responsibilities regarding the implementation of strategies, the management, research and development and in the process of value addition.
At the same time, going beyond the external facts, we shall also try and determine the non-material capital of these American firms in France, that is to say, the manner in which they succeeded in engendering a positive “perception”. We shall look at how they created and established their brand image in the name of modernity, of progress, of quality, of innovation and of their ability to help French firms. These immaterial gains were added to the material advantages (such as technological gains and economies of scale in research and development) to create an aura of power. We shall then see how this surrender to a purely capitalist force and the consequent takeover of a significant portion of the production capacity and market share resulted in an anti-American backlash which was due as much to a greater public awareness as to the government. This compelled the American corporations to launch a campaign of organizational communication in order to increase their participation in French innovation and expansion.
While this study follows in the footsteps of Mira Wilkins’ pioneering book, we have also used personal material on the evolution of business corporations in France and the Government’s economic policies. We have also taken recourse to bank archives, books reconstituting the history of American corporations, on the relations between French companies and their American sister-concerns as well as the published sector-wise histories at the national or European scales. Finally, we have also systematically combed through the 1960-1970 issues of the two major journals targeted at corporate management, L’Express and L’Expansion, from where, apart from several bits of interesting information, we also collected a several advertisements which will help us to analyze the brand image projected by American enterprises in France.
1. As a pre-history: Bridgeheads of technical and commercial advance (from the 1900s to the 1940s)
Due to a low population growth rate (only some 40 million) and varied income levels (because a large section of the population remained rural and unsalaried) which constrained economic growth, France was far from being an obvious target for American corporations which mainly sought emerging markets fueled by rising living standards, widespread employment and urbanization. Nevertheless, in 1929 France was ranked third among all European nations in terms of direct American investments.


Us direct investments in Europe in 19298 (book value in million us dollars)




manufacturing

selling

petroleum

public utilities

total

Great-Britain

268,2

66,5

21




485,2

Germany

138,9

16,8

35,3




216,5

France

90,9

13,8

25,1

5,3

145

Italy

13,2

2,3

25,9

66,5

113,2

Spain

12,4

4

8,5




72,2

Belgium

38,3

3,5

19




64,2

Total

628,9

132,9

213

145,4

1,352,8

Yet, direct American establishments were relatively rare, with partnerships (along the lines of a “joint venture”) being the order of the day. And so it was in the field of electric engineering8, which also served to highlight the superiority of American technological know-how due to which French companies had to take recourse to several patents held by their overseas sister-concerns. Apart from the few German patents, it was the patents held by Edison, Thomson Houston and Westinghouse9 which made it possible to erect power plants in the country. In 1900, the first metropolitan transport system began in Paris. It had a Sprague drive train based on General Electric patents and was powered by Thomson Houston patented engines. This dependence on a wide range of foreign equipment explains the massive imports from America which accounted for 17.8 out of the 21 million francs worth of agricultural equipment imported in 1902 – not to speak of the buying of patents. In a separate chapter, Patrick Fridenson has studied the role played by the Strowger telephone switching patents which were first acquired by Postel-Vinay in 1982 and subsequently bought by Thomson-Houston in 1908 before its affiliation in 1925 to the Telephone company Thomson-Houston which in its turn was absorbed by the American giant Itt. In 1925, it was transformed into the Compagnie générale de constructions téléphoniques (Cgct). The Itt group which had taken over the French subsidiaries of International Western Electric Company (part of the Att group of companies) in 1920, including a factory in Paris10, thus had a solid base in France from the mid 1920s and continued to be well settled till the 1970s. Meanwhile the French corporation Csf had signed a patent exchange agreement with Rca in 1910.


American patents were also used for the manufacture of some materials. One such venture, Eternit (for piping and coating using specialized material – especially with asbestos) was so original and successful that it needed two factories (one at Paray-le-Monial and the other at Prouvy) 11, and “an eternit” entered into the current language of construction as a generic term used for anything made or coated with a similar material. Meanwhile, the Corning Glass group also established, in 1920, a subsidiary in France for the manufacture of refractories (electro-refractories) and the Bakelite Corporation sold its patents on certain plastic materials (“Bakelite” as it was then called) to some industries in the North. On a smaller scale, we find that in the automobile industry, Berliet made use of an American engine patented by Ricardo from 1934 to 1958, there were some technical sales mous signed by the trading corporation Fenwick and in 1930, a technological collaboration in the clothing industry between the American Jantzen and Poron, a hosiery company based at Troyes, for the license and sales (in France and Belgium) of swimwear. Though it is true that Dupont of Nemours had already opened a subsidiary (the French company Fabrikoid) in the 1920s12, the major turning point regarding the textile industry came when an agreement was signed between Rhône-Poulenc and Dupont de Nemours (which had already established a partnership in Europe with the British Ici in 1929) on 3rd October 1931. The agreement led to an exchange of patent rights and on 30th March 1939 Rhône-Poulenc acquired the patent for Nylon13. It was put into practice by Rhodiaceta, a subsidiary in Lyon which set up a factory at Vaise14. Though the first strands were delivered on 7th May 1941, it was only towards the end of the war (in 1944) that the 50 ton mark was reached and mass production15 began in the 1950s. Meanwhile in 1945, the license was extended to the Germany and Italy. Thus, the on-site manufacture by direct subsidiaries was practically non-existent in the materials and equipment sector.
Despite the major differences in the lifestyle and standard of living between the United States and France in the first couple of decades of the 20th century, the “American way of life” had already begun to make inroads in the French mindset by the means of advertisements which had just begun to assume their “modern” incarnations – the magazine press, radio, street hoardings, etc. But the major hurdle for the spread of these consumer goods lay in the distribution network itself due to the predominance of the local “boutiques”, the fact that the larger supermarkets were confined to the bigger towns and the lack of the cost-price shops which came up only in the 1930s. Even otherwise, the industries as well as the markets were also fragmented, with traditional, family-owned brands dominating small regional markets. Nevertheless, the march towards a “consumer culture” continued thanks to French as well as foreign innovators (Monsavon, etc. in France and Lever-Unilever, etc. abroad) with its pace set by the bulk orders placed by the purchase departments of the larger chain stores.

In 1923 the American company Palmolive established a bridgehead in France by entrusting Cadum16 – which was already famous for its advertisements and which enjoyed a solid 50 per cent market share in soaps and other toiletries – the manufacturing of its own products, which it did in a factory situated at Courbevoie17 from 1928 onwards. Later, when Palmolive merged with Colgate18 in 1929, this latter’s products were also entrusted to Cadum in order to fend off the commercial offensives launched by what had, in that same year, become the giant Unilever. This is the beginning of the history of the marketing strategies19, the ad campaigns and the sales of some American corporations which gave rise to the establishment of “brand names” and methods of consumer persuasion. In 1923, American Milk Products set up a factory in France20 for the manufacture of concentrated and boxed milk, while the introduction of Coca Cola in 1933 opened up the “ready to drink” market21. Similarly, Gillette had a firm foothold in France with a factory in Paris and an established brand name. Its French director presented Lindbergh22 with a Gillette razor when he reached Paris in 1927.



Household appliances too did not escape the American technological influence and penetration. Despite some spirited resistance from local manufacturers23, Singer began the trend by setting up a factory near Paris, at Bonnières-sur-Seine and infiltrated the growing sewing machine market. The French sales of Singer accounted for some 5.3 per cent of the Singer group’s total sales in 1912, which meant that it stood fifthh in rank after the Russian (24.5 per cent), the us (17.2 per cent), the Germano-Austro-Hungarian group (12 per cent) and Great Britain (5.5 per cent)24. The American Radiator Company had several subsidiaries in Europe, including one in France with a factory at Dôle (with some 700 employees)25. Finally, Eastman Kodak, which had chosen London as its European base26, entered France in 1891-1897. It introduced its foldable pocket camera at the turn of the century and followed it up with the Brownie. Soon France was dotted with Kodak boutiques selling Kodak negative films. An agreement with the French firm Pathé gave it the right to distribute positive films in France and negative films in Europe and in the colonies. But when the partnership broke in 1909-1912, Kodak lost a valuable asset – until 1927, when Pathé returned to form Kodak-Pathé with Kodak holding 51 per cent and Pathé the remaining 49 per cent (in 1931, Kodak bought over the rest). While Pathé concentrated on motion picture production, Kodak-Pathé took up the manufacture and sale of film made and developed by a factory at Vincennes27.
The major advantages of the American industries lay in their supremacy in engineering and precision engineering. The French automobile market attracted investments from Ford28, us tire manufacturers (Goodrich having set up a factory in France even before 1914), ball-bearing manufacturers29 and oil companies such as Caltex and Esso Standard30. In the office automation sector (with typewriters to begin with and later, with multipurpose electromechanical machines which could write, calculate, tabulate, etc.), American businesses captured large sections of the French market, and despite the competition from German and British firms, established a solid reputation as early as 1900-1920. Thus, Underwood-Elliott Fischer, Royal, Remington Rand and Ibm entered France31 and Europe by setting up assembly plants either in partnership with a local party or as a direct investment. The Computing Tabulating Company (forerunner of Ibm) added a production facility in 1922 to its marketing subsidiary (1920) in order to check the growth of another American company, Powers. In 1936, these bridgeheads turned into the Compagnie électro-comptable (Cec, with 650 employees) which produced (in its factory at Vincennes and also, from September 1941 onwards, in the one at Corbeil-Essonnes) and sold a large section of Ctr-Hollerith’s range of products with orders from both public and private sectors.


A chronological table detailing the industrial installations set up by some North American corporations before 1940

1905

Gillette

Razor blade factory east of Paris

?

Singer

Factory at Bonnières-sur-Seine

15 July 1914

Ancestor of Ibm (Computing Tabulating Company)

Establishment of the French subsidiary

From 1916

Ford

Bordeaux 1916-1917

Asnières 1925

Strasbourg (Matford)

Poissy 1937



1918-1920

Coca Cola

Bottling plant for some months

1920

Société internationale de machines comptables

Marketing punch-card based statistical machines of the Computing Tabulating Company

1920

Itt

Buys several units issued by Western Electric-Att

1921

General Electric

Partner in the Compagnie des Lampes, created in collaboration with the Compagnie Générale d’Electricité (25 %) and Thomson-Houston

1923

Palmolive used Cadum as a subcontractor

Courbevoie (factory in 1928)

1923

American Milk Products

Factory in France

1925

Itt

Buys several units issued by Thomson-Houston and Western Electric-Att

1925

General Motors France

Création of the subsidiary32

1926

Massey-Ferguson

First sales in France

1927

Kodak-Pathé

Eastman Kodak takes over Pathé’s photographic branch to create Kodak-Pathé (factory at Vincennes)

1929 (December)

Caltex (Califonian-Texas Corporation)

Acquires Gironde’s oil refineries (refinery at Ambès)

1932

Ideal Standard

Factory at Dôle

1937

Caltex

Merger of Texas Company with the Huiles Galena, and the integration of its factory at Havre

1941

Ancestor of Ibm

A second factory at Corbeil

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