STRATEGY and STRUCTURE of COTTON and STEEL ENTERPRISES in Britaln, 1900-1939*
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STRATEGY AND STRUCTURE OF COTTON AND STEEL ENTERPRISES IN BRITAlN, 1900-1939* By SHIN-ICHI YONEKAWA** Introduction Needless to say, cotton and steel are representative of the old industries in Britain,this ~oentury, and up till now it has been generally argued that their performance during this I)eriod has been rather poor, which I think can not be denied at least from the overall national point of view. However, when the analysis is done using materials concerning individual enterprises, their performances prove to have varied markedly from each other, but at the same time, to also have demonstrated a common characteristic strategy on an industry-wide basis. In the following study attention is to be paid to tracing strategies and structures in 'several individual enterprises in some detail, and also to obtain a general idea of the two industries' strategies and structures. ' mphasis will be put upon the period from the early 1900's to the late 1930's partly because some work has already been done dealin~ with ihe period prior to the turn of the nineteenth century, but largely because I have access ~o original materials dated only after that time.l In the cotton textile industry six companies were selected, all of which appear in a ~table listing the largest British industrial companies in 1905 (Courtaulds is excluded)2 com- piled by Professor P.L. Payne.3 In the case of the iron and steel industry the selection of ・companies is rather arbitrary. Firms commonly called iron and steel companies carried ,out a broad range of mining and manufacturing activities, and the variations in their range ,of products were very remarkable. There appear seven companies in the table mentioned .above, three of which were chosen along with two wellknown but not so large companies ・considering their range of activity.4 * This paper is to be read at the First Meeting of the International Conference on Business History, l 974. ** Professor (Kyo~,ju) of Business History. * The printed records I use in this study are, in the main, The Times and The Statist. ' Courtaulds is excluded not only because of its no connection with cotton, but also because Professor D.C. Coleman published excellent books as to the history of Courtaulds, and I refer to this company in the ,conclusion of this paper. * P.L. Payne, The Emergence of the Large-scale Company in Great Britian, 1870-]914, Ec. H. R., 2nd =ser., xx, pp, 539-40. ' mong all of the largest 52 companies listed in the table, there were nine iron and steel companies. As 'for these companies, Vickers, Armstrong and William Bearmore are excluded ・ bccause they had too close ・connection with the munition industry to argue in this study. The development of Bolckow was quite simi- lar to that of Dorman, and Dorman amalgamated with it in 1929 as mentioned below. Likewise, the Cam- tnell's history resembles the John Brown's. Pearson and Wigan Coal were also amalgamated which I state ,afterwards. 36 H[TOTSUBASHI JOURNAL OF COMMERCE AND MANpGEMENT [ July Organisation , of the Cotton Textile Industry5 The cotton textile was a strongly export-oriented industry, and at its peak on the eve of World War I more than 80~ of its output was exported to overseas markets, capturing 65% of the international cotton trade. During the war when British cotton companies resigned themselves to some unfavourable conditions, the developing countries, especially Japan and India, moved to secure their home markets. As a result, their output continued rapidly to increase and grew competitive to a great extent by reason of the use of cheaper cotton and lower labour costs. The decreasing output of British cotton textiles was such_ that it amounted to less than half the pre-war level by 1938 (see Table l). Parallel with diminishing exports, markets for British cotton textiles also changed during this period as. indicated in Table 2. However the point of importance is the remarkable difference as to the rate of decrease- between the main four kinds of exported cloth as can be seen from Table 3. It was grey cloth that received the continuing damage for British cotton trade throughout the period. On the other hand, exports of printed and bleached cloths, especially dyed cloth remained relatively stable at a comparatively high level during the 'twenties after the drastic decrease- of 1920-21. As often said, the British cotton industry was characteristic of a high degree of spe-- cialisation in its functions, which had gradually evolved in the course ofthe growing activity~ of the industry. It was at this point that it showed a striking contrast when compared with the Japanese. There appeared some vertical integrations only to a very limited extent. So. usually there were six sorts of independent persons engaged in the industry: the cotton. TABLE I . PRODUCTION AND EXPORTS OF COTTON' TEXTILES, 1912-38 (mn sq, yd.) Yam (mn I b) Piece Goods Source: G.C. Allen, British Industries and Their Organization (3rd ed, 1951), pp. 196, 223. 5 As for this subject, many scholars have referred. My following statement is a mere rough outline or what is related to my study. ' I am above all indebted to wellknown Survey of Textile Industries (1928) and G.C. Alien's British Industries and Their Organization (1933). The post-war works are following : S. Pollard. The Development of the British Economy, 1914-1950, 1962; D.H. Aldcroft (ed.). The Development of Britisk Industry and Foreign Competition, 1875-1914, 1968 ; D.H. Aldcroft, Inter-war Economy. 1913-1939, 1970;; B.W.E. Alford, Depression and Recovery ? British Economic Growth, l918-1939, 1972. 1974] STRATEGY AND STRUCTURE OF Co~oN AND STEEL ENTERPRISES IN BRITAlN, 1 900-1939 37 TABLE 2. BRITISH EXPORTS OF Co~oN PIECE GOODS To GROUPS OF MARKETS (Million square yards) * Million linear yards. t The British Colonies in which quotas on imports of certain foreign textiles were imposed in 1934. ~ Norway. Sweden, Denmark, Finland, Latvia, Lithuania, Yugoslavia, Poland, Turkey, Argentina, Uruguay, Peru. Source: R. Robson, Tlle Cotton 1,Idustry in Britain, 1957, p. 11. TABLE 3. BRITISH EXPORTS OF CoTTON PIECE GOODS To GROUPS OF VARIETIES (m. L) Source: Calculated from Survey of Texti!e Industries and Statistical Abstract for U.K. importers and brokers, the spinners, the yarn merchants and brokers, the weavers or manu- facturers, the finishing trades and the piece-goods merchants. Furthermore, the companies engaged in manufacturing or merchandising were inclined to specialise in certain kinds <)f products, and in the case of marketing, merchants were separated into several groups .according to their export areas. Entrepreneurs in the cotton industry seem to have believed in ' industrial individu- alism '. They used to be actively opposed to state intervention up to the 'thirties. Some federations were organised to push for their common interests in the 'twenties, but their ,efforts were never satisfactory. In the course of the depressed years of the 'thirties, en- trepreneurial attitude became favourable to state intervention, to the extent that it was ・considered desirable for the government to have some degree of control over working Oonditions and to exercise a restraining influence over excess production. J. & P. Coats and English Sewing Cotton6 J. & P. Coats originated in a small mill in Paisley near Glasgow in 1826 and, after ' In this study I owe much of my description as to the period prior to 1906 to H.W. Macrosty's The Trust Movement in British Industry. 38 HITOTSUBASHI JOURNAL or COMMERCE AND MANAGEMENT [July absorbing four rival firms in 1895-6, grew to be one of the earliest and most successful world enterprises by the beginning of the twentieth century. Previous to a capital increase' in 1919, a splendid dividend of 30-35% was paid during the prosperous years by controll-- ing more than 80~ of the market share of cotton thread in Britain and trading 80 ~; of the' group's products in foreign countries.7 ' ts managemnet appears to have been centralised considering the process of its emer-- gence. Two prominent aspects regarding management strategy, overseas investment and control of marketing, should be noticed for this successful period. The overseas invest- ment had its origin when the compnay secured works in Rhode Island soon after the begin-- ning of the great depression. Thus, by means ofpossessing thirteen mills in Russia and other countries in following years, the company could state 'by far the larger part of the co~8 pany's profit is now (1899) derived from the shares in foreign manufacturing companies . This management policy was energetically pursued up to the second half of 1930's in spite of the loss of the Petrograd mill as a result of the Russian Revolution, because the gap in product costs tended to grow wide. In consequence of this policy, the company had more' than fifty separate mills all over the world in 1930, and so ' the position abroad is stronger' than it has ever been '.9 Obviously different from other cotton textile companies, J. & P. Coats had marketing power. ' What the " Combine " has done has been to destroy the business of the middle- men All these smaller dealers and consumers can now buy direct from the Central~ Agency '10 which was its marketing subsidiary. This was no doubt one source of the com-- pany's huge trading profits. On the other hand, the reason why it did not participate in_ organising the spinning section is not difficult to understand. The section of fine cotton spinning was highly competitive at the end of the nineteenth century, which resulted at last in the emergence of the Fine Cotton Spinners' and Doublers' Association in 1898_ So it was reasonable for J.