Global Production
Effects 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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Opportunities
• Entering foreign
markets
• Earning more
foreign currencies
• Diversifying
exports
• Getting new skills,
knowledge, and
technology
Extending
the scope
of gains
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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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Challenges
Much competition
Prices down
Production and technological capabilities up
Smaller suppliers survive difficultly
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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 networks
Global value chain
analysis:
Global production
Network analysis:
i. Strategic global
dispersion
ii. Possibilities for
technological and
industrial upgrading
i.
Flagship firm’s
production network
ii. How it is dispersed
iii. Transferring
technology
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What are Global Value Chains ?
• Value chains include a sequence of related activities.
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Global 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 ?
• 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 Networks
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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 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…
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Dell’s Value Web Model
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Dell’s Value Chain
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Global 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 Organization
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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… …
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Source: Dell Website
Global Organization… (cont.)
Percentage of total sale
9%
21%
Americas $22.2B
EMEA $6.6B
Asia-Pacific $3B
70%
Employment
4,550, 13%
Americas
EMEA
Asia-Pacific
8,250, 24%
21,600, 63%
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Location 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.)
• 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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Outsourcing
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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 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 Chain
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Dell’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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Dell’s Other Operations
• 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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Dell’s Other Operations
• 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 US
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Reaction 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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Conclusions
• 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
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