Global Production. JiJun Xia & Yaching Chang 2 Effects of Globalization Fragmenting activities in...

Global Production

JiJun Xia & Yaching Chang

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Effects of GlobalizationEffects of Globalization

• Fragmenting activities in all stages of production.

• Performing activities in different countries and reintegrating them through production systems.

• Global production brings opportunities

and challenges.


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OpportunitiesOpportunities

• Entering foreign markets

• Earning more foreign currencies

• Diversifying exports

• Getting new skills, knowledge, and technology

ExtendinExtending the g the

scope of scope of gainsgains


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Opportunities…(cont.)Opportunities…(cont.)

• Benefiting latecomers not having the industrial base of the first movers and advanced capital markets and financial institutions

• Stimulating the more business-friendly environments.


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ChallengesChallenges

Much competition

Prices down

Production and technological capabilities up

Smaller suppliers survive difficultly


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Challenges…(cont.) Challenges…(cont.)

• Even successful companies hardly sustain competitiveness.

• Still, some countries have succeeded to use the opportunities from this new business condition.

Ex: Asian countries high-technology-intensive products


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Global value chains and global production networksGlobal value chains and global production networks

Global value chain

analysis:

i. Strategic global dispersion

ii. Possibilities for technological and industrial upgrading

Global production

Network analysis:

i. Flagship firm’s production network

ii. How it is dispersed

iii. Transferring technology


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What are Global Value Chains ?What are Global Value Chains ?

• Value chains include a sequence of related activities.


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Global Value ChainsGlobal Value Chains

• The market structure influence innovation possibilities

Low-income, price elastic markets process innovation

High-income markets product innovation


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What are global production networks ?What are global production networks ?

• GPN participants at different hierarchical layers: growth, strategic direction, and network position

• A global production network can participate in different value chains


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Global Production NetworksGlobal Production Networks


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Global Production Networks…(cont.)Global Production Networks…(cont.)

• Production networks may compete with each other in a product-specific value chain, but they may also cooperate.

Ex: Solectron & Flextronics

• Dell is a flagship firm that works like a brand leader.


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Organization of a Global Production NetworkOrganization of a Global Production Network

• In 2001, Dell Computer became the world’s largest personal computer vendor.

• Dell’s business model is simple in concept, but very complex in execution.

• Building PCs to order


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DELL ’s Partners…DELL ’s Partners…


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Dell’s Value Web ModelDell’s Value Web Model


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Dell’s Value ChainDell’s Value Chain


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Global OrganizationGlobal Organization

• Dell is a global company operating in 34 countries in three world regions, with about 35,000 employees and $30 billion in sales.

• Dell is organized along geographic lines into the Americas, Asia-Pacific , and Europe/Middle East/Africa (EMEA).


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Global OrganizationGlobal Organization


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Global Organization… (cont.)Global Organization… (cont.)

• We heard this explanation several times in interviews with Dell people in the EMEA region. They pointed out that Dell EMEA deals with 13 different languages, 18 different currencies, and 18 different tax rates whereas Dell North America deals has only 3 different languages, currencies, and tax rates… …

Source: Dell Website


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Global Organization… (cont.)Global Organization… (cont.)

Employment

21,600, 63%

8,250, 24%

4,550, 13% Americas

EMEA

Asia-Pacific

Percentage of total sale

70%

21%

9%

Americas $22.2B

EMEA $6.6B

Asia-Pacific $3B


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Location of ManufacturingLocation of Manufacturing

• 1990: Opens manufacturing plant in Ireland• 1996: Opens manufacturing plant in Malaysia• 1998: Opens manufacturing plant in China• 1999: Opens manufacturing plants in

Tennessee and Brazil


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Location of Manufacturing…(cont.)Location of Manufacturing…(cont.)

• What should take into consideration…???

General Location Factors• Market access• Labor costs and quality• Transportation and telecommunications

infrastructure• Government incentives• Industry clusters


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OutsourcingOutsourcing


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Outsourcing…(cont.)Outsourcing…(cont.)

• While sourcing of materials for PCs (major components and systems) is done centrally, sourcing of consumables is local (box and shipping material, printing of keyboards, printing of manuals, etc.).

• The majority of sourcing is from low cost suppliers in Asia, but some sourcing is from local producers.


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Impacts of Dell’s Location on Supplier LocationImpacts of Dell’s Location on Supplier Location

• With so many different suppliers and partners involved, the location decisions of these companies naturally vary by company and location. Many parts and components are manufactured.

• For instance, Solectron and SCI supply Dell’s U.S. plants from their plants in Guadalajara, Mexico, and from plants in the U.S.


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Supply ChainSupply Chain


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Dell’s Other OperationsDell’s Other Operations

• Call Centers

• Dell makes extensive use of call centers, both for sales and for technical support.

• Dell generally organizes its call centers around its major customer segments with different call centers for relationship and transaction customers.


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• Marketing, Sales and Support

• The sales, service and support functions are located in the individual countries because these activities must be close to end customers.

• As a result, Dell has sales and service offices in 34 countries around the world, usually in a large urban area and with multiple offices in some countries.


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• IT and Data Centers

• A network of data centers supports Dell’s sales, manufacturing, logistics and other operations.

• Global applications, such as online sales tools, order management and supply chain management.


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Dell’s Facilities In USDell’s Facilities In US


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Reaction to Market Slowdown in 2001Reaction to Market Slowdown in 2001

• Dell was the only PC maker to show any growth in sales in 2001, but it still saw much slower growth than the 30-50% annual gains it was used to.

• In order to cut costs, Dell laid off about 5,000 workers, mostly in the Austin, Texas area. About 600 workers were laid off in Europe.


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ConclusionsConclusions

• Dell has become a global company with global production networks in Americas, EMEA and Asia-Pacific.

• Market potential is the driving force behind Dell’s general location decisions.

• Dell has organized its operations by region and by country.


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THANK YOU

Global Production. JiJun Xia & Yaching Chang 2 Effects of Globalization Fragmenting activities in...

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