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Global Production

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. Entering foreign markets

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Global Production

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  1. Global Production

  2. 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. JiJun Xia & Yaching Chang

  3. Entering foreign markets • Earning more foreign currencies • Diversifying exports • Getting new skills, knowledge, and technology Extending the scope of gains Opportunities JiJun Xia & Yaching Chang

  4. 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. JiJun Xia & Yaching Chang

  5. Challenges Much competition Prices down Production and technological capabilities up Smaller suppliers survive difficultly JiJun Xia & Yaching Chang

  6. 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 JiJun Xia & Yaching Chang

  7. Global value chains and global production networks Global production Network analysis: • Flagship firm’s production network • How it is dispersed • Transferring technology Global value chain analysis: • Strategic global dispersion • Possibilities for technological and industrial upgrading JiJun Xia & Yaching Chang

  8. What are Global Value Chains ? • Value chains include a sequence of related activities. JiJun Xia & Yaching Chang

  9. Global Value Chains • The market structure influence innovation possibilities Low-income, price elastic markets process innovation High-income markets product innovation JiJun Xia & Yaching Chang

  10. 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 JiJun Xia & Yaching Chang

  11. Global Production Networks JiJun Xia & Yaching Chang

  12. 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. JiJun Xia & Yaching Chang

  13. JiJun Xia & Yaching Chang

  14. 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 JiJun Xia & Yaching Chang

  15. DELL ’s Partners… JiJun Xia & Yaching Chang

  16. Dell’s Value Web Model JiJun Xia & Yaching Chang

  17. Dell’s Value Chain JiJun Xia & Yaching Chang

  18. 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). JiJun Xia & Yaching Chang

  19. Global Organization JiJun Xia & Yaching Chang

  20. 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… … Global Organization… (cont.) Source: Dell Website JiJun Xia & Yaching Chang

  21. Global Organization… (cont.) JiJun Xia & Yaching Chang

  22. 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 JiJun Xia & Yaching Chang

  23. 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 JiJun Xia & Yaching Chang

  24. Outsourcing JiJun Xia & Yaching Chang

  25. 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. JiJun Xia & Yaching Chang

  26. 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. JiJun Xia & Yaching Chang

  27. Supply Chain JiJun Xia & Yaching Chang

  28. 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. JiJun Xia & Yaching Chang

  29. 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. JiJun Xia & Yaching Chang

  30. 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. JiJun Xia & Yaching Chang

  31. Dell’s Facilities In US JiJun Xia & Yaching Chang

  32. 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. JiJun Xia & Yaching Chang

  33. 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. JiJun Xia & Yaching Chang

  34. THANK YOU JiJun Xia & Yaching Chang

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