For any entity to survive, it needs to be able to adapt. This is no different for corporations. In the fast-paced world of business, fluctuations, if improperly handled, can wreak havoc upon a corporation’s existence. Long-term plans should handle these unforeseen changes. However, information is propagating more rapidly than before and technological developments are accelerating at an exponential rate. The conventional definition of a long-term plan is one that is five years or more. Certain corporations by their very nature may not be able to safely implement specific long-term plans.
To be more specific, U.S. corporations are laying greater stress on the short-term rather than the long-term view. This is because the U.S. is shifting from a manufacturing industry to a service industry, as the manufacturing industry moves into foreign, less-developed countries. In the U.S., there is a pressing demand for service personnel. For example, NJIT has an increase in service-oriented majors, especially in Computer Science.
The service industry by its own nature is best suited for short-term planning. A service corporation must adapt to the clients it serves; it is a follower. Every time its customers’ needs change, it must conform.
One of the United States’ biggest service exports, entertainment, is gravitating towards short-term goals. Movie companies tend to fund forgettable blockbusters, which make enormous amounts of revenue in a short amount of time. These companies’ successes are gauged by the number of big hits they have within the year. As such, they gamble their resources to the point of bankruptcy, just to attain a smash hit.
Another component of the entertainment industry is music. Music companies now search for disposable talent. Record labels bank on singers more for image than talent, specifically with short-term money making in mind. A noticeable trend is occurring on the Billboard charts. The Billboard Pop Catalog keeps track of sales of older albums, which comprise a large percentage of all albums sold. Albums released before the 1990’s are consistently outselling the newer ones. This supports the idea that record labels would rather make revenue in the short run rather than the long run.
The owners of a corporation indirectly decide on the direction it takes. As such, shareholders’ trading patterns affect what corporations do. The early 1999 breakage of the Dow Jones Industrial Average 10,000 mark exemplifies stockholders' faith in corporations. However, especially now, the majority of stockholders are very jittery. Daily fluctuations as high as $30 in share price are common, especially in the technology sector, such as Amazon.com and Microsoft. This shows that the stockholders themselves are impatient and investing for the short-run. Corporations that realize this would change their strategy to attract investors. Short-term plans for short-term gains would appease these jumpy shareholders.
A traditionally long-term strategy, mergers and takeovers, are seeing an increase in recent years. Most notably, the MCI/Worldcom merger, AOL buying Netscape, AOL-TimeWarner-EMI, and the numerous oil company mergers involved massive billion-dollar stock swaps. Offsetting the cost of these acquisitions takes a relatively long amount of time. Even so, this long-term action results in short-term plans. With the nature of mergers, the two distinct plans of each corporation cannot always coexist. The aggregate entity must now develop a new strategy.
Corporations that are prospects for mergers or takeovers must rearrange their plans. Sometimes mergers need to be approved because of antitrust laws, and a company must unload resources, such as store locations or subsidiary companies to get approval. In these cases, whatever plans the corporation had for the resources are wiped away and replaced by the merger goals.
Goals are adapted as frequently as required. For U.S. corporations, that need arrives every time innumerable factors vary, from clients’ needs to shareholders’ edginess. U.S. corporations are only adapting to their environment.