Page 76 - Introduction to Business

50 PART 1 The Nature of Contemporary Business

From Garlic to Biomedical Science: Adapting
Business to Environmental Change

lthough garlic is used primarily as a food-flavoring herb today, it has
historically been a remedy for a wide variety of health conditions and
Adiseases. Studies by the U.S. Department of Agriculture indicate that
garlic has become a popular nutrition item in the United States, and has also
gained scientific credibility as a significant contributor to good health. Garlic
consumption in the United States soared in the 1990s, with per capita use
increasing to 3.1 pounds in 1999, three times the 1989 level. The strong surge
in demand can be attributed to two main factors. First, globalization has led to
a rise in popularity of ethnic cuisine as consumers seek out new tastes and
experiences. Second, garlic’s perceived healing qualities (historically, garlic
was valued as a medicinal herb by the Chinese, Egyptians, and Indians) cre-
ated a demand in the health supplement industry.
To satisfy the growing demand, U.S. garlic production increased from
16,000 acres in 1989 to 41,000 acres (output valued at $200 million) in 1999,
with imports accounting for another 20 percent. Garlic production is concen-
trated both internationally and domestically (in the United States). China is
the world’s largest producer with 66 percent of world output, followed by India
and South Korea producing 5 percent each and the United States producing 3
percent. Within the United States, California accounts for 84 percent of U.S.
garlic acreage. Gilroy in Santa Clara County is billed as the garlic capital of the
United States because a significant volume of California’s fresh-market garlic,
which is hand harvested, is shipped from there. However, rising U.S. produc-
tion costs (higher cost of labor, water, etc.) and China’s entry into the World
Trade Organization (WTO) are rapidly shifting the garlic production scene.
Since the early 1990s, major U.S. garlic producers like Christopher Ranch in
Gilroy and the Garlic Company have lobbied local and national politicians to
retain tariffs and trade restrictions like quotas to ward of competition from
China. Yet, with China’s entry into WTO, which will dismantle trade barriers
against China soon, U.S. garlic producers are being forced to give up hiding
behind tariff protection. The issue for U.S. garlic producers is to compete
effectively on the basis of competitive advantage and efficiency, that is, doing
the right things or else! Having given up on lowering garlic production costs,
Gilroy now hopes to transform itself from an agricultural backwater to a bio-
medical center with affordable land for technology parks—a sea change in the
business environment.

Introduction

The wedge between purely domestic and international business has narrowed
drastically with open trade and advances in information technology. As the open-
ing story illustrates, the business environment has become truly global. Even as
students, you tend to consume goods and services that are produced both domes-
tically and overseas. When you purchase music CDs or DVDs, invariably you are
paying for a service (music or a movie provided by a singer or a movie producer like
Disney or Sony) produced domestically, in the United States. When you purchase
an automobile like Toyota Celica, Hyundai Tiburon, or Ford Mustang, do you ever
wonder the type of business environment in which these companies operate? The

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