WHAT KIND OF company is best adapted to worldwide business competition? The General Electric Co. is buying RCA because, it says, the combination will be splendidly equipped to compete on an international scale. Behind this dramatic merger you can discern the lessons that GE extracts from its own considerable experience in international markets, and from the successes of the big Japanese companies. The interesting question here is whether GE is drawing the right conclusions from the Japanese case.
As GE says, it wants to become less dependent on the manufacture of mass-produced products such as light bulbs and washing machines. Instead, it wants to move more heavily into advanced technology and services. The big Japanese companies, as GE reads their record, have benefited enormously from a highly protected home market in which they develop the momentum to launch their highly effective leaps into foreign markets. How does an American company compensate for the lack of a protected home market? It looks, apparently, for businesses that are not subject to foreign competition.
For one example, RCA's NBC television network. For another, RCA's communications services. GE has concluded that life in the world markets is going to be full of ups and downs, and RCA's television and communications revenues will provide a welcome financial stabilizer.
But if there are theoretical benefits in this kind of diversity, there are also practical dangers. GE is one of the most skillfully managed companies in the world. But the experience of conglomerated companies in the past couple of decades suggests that it becomes increasingly difficult to run a corporation well when it acquires widely differing kinds of businesses. If GE succeeds, it will set an influential pattern in American business. But success is not a sure thing.
One customer with real grounds for uneasiness is the Defense Department. For some time there's been a trend toward concentration in the defense industry, and both GE and RCA are major contractors. This merger gives the Pentagon additional cause for concern that it is becoming the captive of a few very large companies.
Otherwise this merger does not seem to pose any large or insoluble threat to competition. It will be carefully examined by the Justice Department and a couple of congressional committees, but there are not many points at which the two companies' product lines overlap. The issues presented here have less to do with conventional antitrust policy than with the efficiency and productivity of the joined companies as they prepare for increasingly sharp competition throughout the world.