Globalization of Major
Manufacturing Sectors
• Textiles & Garments: classic case of laborcost deviation Figure 7.8
• Steel – Movement to rapidly industrializing
countries (Figure 7.10)
• Automobiles (Figure 7.13, 7.14)
• Electronics (Figure 7.16, 7.17)
• S-Curves – Figure 7.15 – the concept is
drawn from the industrial design literature
– File on line is from MIT Opencourseware
site – www.ocw.mit.edu
Changing Geography of U.S.
Manufacturing
1990-2000 % Change
Manufacturing Employment
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
-6%
-13%
16%
8%
-7%
10%
-23%
-18%
-23%
-5%
5%
-13%
22%
-4%
8%
10%
U.S. Total -3%
Kansas
12%
Kentucky
12%
Louisiana
0%
Maine
-16%
Maryland
-12%
Massachusetts -16%
Michigan
5%
Minnesota
10%
Mississippi
-5%
Missouri
-8%
Montana
11%
Nebraska
19%
Nevada
68%
New Hampshire 1%
New Jersey
-20%
New Mexico
2%
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
-22%
-8%
48%
-2%
8%
9%
-9%
-26%
-9%
45%
-2%
11%
22%
5%
-9%
-4%
-7%
10%
21%
Date of Maximum Employment in
Manufacturing
Urban-Rural Manufacturing Trend
1991-2004
International Movement of U.S.
Manufacturing
• Rise of F.D.I.
• Shifting locations of F.D.I.
– 1945-1960 Canada & Latin America
– 1950’s Western Europe
– 1960’s onward – a global reach
• Cumulative employment abroad of 500
largest U.S. corporations equaled
domestic employment
• Most investment in advanced
economies
Global Employment of U.S. MNC’s
China?
Key Trends for U.S. Manufacturers
• Large overseas markets pull U.S. manufacturers
into them
• The growth of nontariff barriers are forcing
localization of production abroad
• Regional trading blocs push investment
strategies and pull firms into these organizations
to get benefits
• Shifting exchange rates are pushing firms to be
flexible as to where they have capacity
• New manufacturing methods are reshaping the
distribution of manufacturing capacity
• Large factories in low-skill labor regions are not
sustainable
The Rise of Flexible Production
Systems
• The historic development of manufacturing
moving from fragmented small-scale
facilities to vertically integrated
corporations – The Fordist Paradigm
• The contemporary development of other
paradigms – just-in-time; total-qualitycontrol; flexible manufacturing systems –
Fig. 7.21
• Consequences of these new
developments on plant size and labor
force skills
From Fordist to Flexible Production
The End of Fordism? The
Flexibility Debate
• Are we not only entering a new long-wave,
where IT is the driving force, but also a new
long-wave in which the basic structure of
productive relations is in massive shift?
• The Fordist paradigm - implicit in the
oligoplistic model - but also linked to
consumption and the regulation of
society/consumption
• Limits to the flexibility argument – can all
industry move in this direction? NO!
A new regime of accumulation?
(1) The emergence of clusters of small firms,
including co-ops
(2) Flexibility related to new machines
(3) Labor’s new position
- functional flexibility (multiskilling)
- numeric flexibility
- financial flexibility
- more part-time, flex time, telecommuting
(4) Changes in market place conditions
- mass markets break down
- rise of niche (craft) markets
Fordism
Low technological innovation
Fixed product lines, long runs
Mass marketing
Steep hierarchy, vertical chains of command
Mechanistic organization
Vertical and horizontal integration
Central planning
bureaucracy
Mass unions, centralized wage-bargaining
Unified class formations, dualistic political
systems
Institutionalized class compromises
Standardized forms of welfare
Prescribed courses in education
Standardized assessment (O level)
Class parties, nationwide
Post-Fordism
Accelerated innovation
High variety of product, short runs
Market diversification & niching
Flat hierarchy, more lateral communication
Organismic organization
Autonomous profit centers; network
Systems; internal markets within firm;
outsourcing
Professionalism, entrepreneurialism
Localized bargaining, core and periphery;
workforce divided; no corporatism
Pluralistic class formations; multi-party
systems
Fragmented political markets
Consumer choice in welfare
Credit transfer, modularity, self-guided
instruction, independent study
Teacher-based assessment (GCSE) or selfassessment
Social Movements; multi-parties; regional
diversification
Emergence of Flexible Specialization
• Fragmentation of the Fordist firm - vertical
disintegration (shedding non-central functions;
outsourcing) and Market fragmentation (niche)
• Adoption of new technologies, especially those
dependent upon computers and
telecommunications (CAD/CAM/FMS)
• Labor force adjustments
– functional flexibility (multiskilling)
– numeric flexibility (adjusting quantities by
task)
– financial flexibility (wage rate adjustment)
– more part time, short-term, temporary work
Flexible specialization & new
industrial spaces
• Piore & Sabel - The Second Industrial
Divide - craft-based districts in Italy,
Germany, Denmark
• Clusters of high tech industry - Silicon
Valley; Route 128; Austin
• Wooden boats in Pt. Townsend WA; Log
homes in Bitterroot Valley MT
• The movie industry
 Debates over aspects of the flexibility thesis
Flexible Specialization and
Regional Industrial
Agglomerations: The Case of the
U.S. Motion Picture Industry
by Michael Storper & Susan Christopherson
• Historically, an oligopoly of
– theaters
– studio production facilities
– actors/production specialists
– spatially clustered in Southern California
• Vertical disintegration: 1950’s - 1970’s, with
consequences in the 1980’s
Productions by Organization
Type
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
Independent
Major
Mini-major
1960
1965
1970
1975
1980
151
190
207
243
222
Number of
productions
per year
The Proliferation of
Establishments
Production Companies
Rental Studios
Properties
Editing
Lighting
Recording/Sound
Film Processing
Film effects
Market Research
Artist representatives/talent agencies
Total
1966
563
13
66
4
2
20
43
10
3
242
966
1974
709
24
33
31
16
33
76
27
5
359
1313
1981
1473
67
184
113
23
187
55
42
24
344
2512
Establishments in the
Entertainment Industry 19681997
1968
666
490
Motion pictures except TV
Motion picture & tape for TV
Services allied to motion picture production NA
Total
1156
1974
1279
978
716
2973
1981
1023
1420
1077
3520
1997 data from U.S. County Business Patterns; in the 1987
revision of the SIC code motion pictures was combined into
a single industry
1997
8916
6343
15259
The Decreasing Size Per
Establishment
Combined
Motion Pictures
and TV
Motion Pictures
Television
Allied Services
1969
23.2
21.2
NA
1974
11.2
20.8
21.3
1981
25
24.1
16.9
1997
7.4
10.7
California’s domination of the
industry - measured by jobs
Jobs
California-pictures
New York-pictures
Others-pictures
California-allied services NA
New York-allied services NA
Others-allied services
NA
1968
15449
6687
3713
1974
20329
4596
9753
1981
40433
8625
10779
1997
31791
8169
25578
9663
3110
2501
12205
3135
2829
125935
7897
41089
Structural Trends – Motion
Pictures & Television
• Retention of core activities: TV & Major
films & channels of distribution
• Forced divestiture of theater chains
• Development of generic specialists
subcontracting with specific producers
for a given film & narrow scope;
linked to major studios; many part-time
workers; “project orientation,”
FLEXIBILITY
• Product diversification: TV, Video, Film
• Establishments clustered in California,
while filming locations have dispersed
The Post-Fordist System is also
more efficient
Role of IT within
and between firms;
logistics revolution
Business Process Reengineering
• Division of labor rationalized
• Employees are empowered to a greater degree
• Tasks are harmonized in other than a linear
sequence
• Processed batches have multiple versions,
allowing scale economies simultaneous with
custom producton
• Work is undertaken where it makes most sense
geographically (recall the 787 production
system)
• Internal structures are simplified / more
coordinated and more decentralized
Downsizing as a consequence
• The growing angst over outsourcing
• The debate over its magnitude
• The debate over what to do for workers
impacted
• The debate over public policy towards it
• The expectation that IT will fuel dramatic
restructuring, accompanied by logistical
sophistication: Friedman’s “flatteners”
Friedman’s Ten Flatteners:
•Outsourcing
•Offshoring
•Open- Sourcing
•Insourcing
•Supply Chaining
•In-forming (search engines)
•The Internet
•Fall of the Berlin Wall
•Netscape’s Public Offering
•Work Flow Software
•The Steroids (Digital,
Mobile, Personal and
Virtual)
He argues together they have
allowed unparalleled
collaboration
The “New Economy”
• Rising productivity compared to recent
years
• The growing importance of IT producing
industries
• The growing productivity in IT using
industries
• Finally, investment in IT appears to be
having an economy-wide impact
Labor Productivity and IT Intensity
All
Less IT
Intensive
GDP/FTE
Growth
Error in Legend!
Source: Digital Economy 2003
A Common Outcome of this
Turbulence: The Product Life Cycle
Demand
Conditions
Very few
buyers
Competitive
Structure
Very few
competitors
Growing
number of
buyers
Entry of new
competitors
Technology
Rapid
change
Less rapid
change
Peak
demand
Declining
demand
Steep falloff
in demand
Shakeout of
weakest
competitors
Stable
Exit of some
population
competitors
of
competitors
Some change, but increasingly stable
technology
Sales
Volume
Initial
Growth
development
Maturity
Decline
Obsolescence
Examples of the Product Life
Cycle
Fashion clothes
Automobiles
Generations of Boeing airplanes
…….but not all products follow this
trajectory:
Levi 501 shrink-to-fit jeans
“Coke” & name brands that play off
product stability: Tiffany; L.L Bean;
Campbell’s Soup
Spatial Reorganization within
Large Business Organizations
•Dynamism in firm activities: their size, number,
function, and geographic configuration
•Inherent flexibility of multiplant firms - either insitu change or locational shift
LOCATIONAL SHIFTS
IN SITU CHANGE
Expansion
of existing
capital
stock
Replacement
of existing
capital
stock
Reduction
of existing
capital
stock partial
divestiture
Investment
at new
location(s)
opening of
branch
plant(s)
Acquisition
of plant(s)
owned by
another
firm
Divestment
of existing
plant(s)
closure or
disposal
Relocation of
entire plant
and
equipment
Healey’s adjustment
framework
1
O
+
Operating Plant
Product A
Product B
Product C
2
4
3
Plant Shut Down
Transfer of Production
Initial Conditions
2
1
2
1
+
3
4
Specialization
3
+1
+2
+3
+4 +3
4
Partial concentration Complete concentration
at an existing site
at a new site
1
Mixed
+2
Evolution of Global
Corporations
Stage I
2
Stage II
• •
1
•
• •
• 1
o
2
3
 Headquarters
•
Production plant
o Sales subsidiary
+ Licensing arrangement
 Acquisition
Exports
+
4
3
Stage III
5
•
2
• • 
• 1

3
+
4
Evolution of Global Corporations
Stage IV

•
6

•

2


• •
• ••1
•
o
8
3
 Headquarters
•
7
5

•
Stage V
• •
4
•
6
9
•
2
Production plant
o Sales subsidiary
+ Licensing arrangement
 Acquisition
Exports
•
5
•

•
•
1
•
8
3
7
4
•
9
Summary
• Global concentrations of manufacturing, but they
are not static
• Capital moves from place to place in the search
for profit
• Multinational corporations and processes of FDI
have reshaped the geography of manufacturing
• Today Schumpeter’s process of “creative
destruction” is fueled by IT, logistics, and the rise
of new production regimes built around more
flexible manufacturing systems