Globalization of major manufacturing sectors
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Globalization of Major Manufacturing Sectors. Textiles & Garments: classic case of labor-cost 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)

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Globalization of Major Manufacturing Sectors

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Globalization of major manufacturing sectors

Globalization of Major Manufacturing Sectors

  • Textiles & Garments: classic case of labor-cost 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

Changing Geography of U.S. Manufacturing


1990 2000 change manufacturing employment

1990-2000 % Change Manufacturing Employment

U.S. Total -3%


Date of maximum employment in manufacturing

Date of Maximum Employment in Manufacturing


Urban rural manufacturing trend 1991 2004

Urban-Rural Manufacturing Trend 1991-2004


International movement of u s manufacturing

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

Global Employment of U.S. MNC’s

China?


Key trends for u s manufacturers

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 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-quality-control; flexible manufacturing systems – Fig. 7.21

  • Consequences of these new developments on plant size and labor force skills


From fordist to flexible production

From Fordist to Flexible Production


The end of fordism the flexibility debate

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

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


Emergence of flexible specialization

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

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


Globalization of major manufacturing sectors

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

Productions by Organization Type

Number of

productions

per year

151 190 207 243 222


The proliferation of establishments

The Proliferation of Establishments


Establishments in the entertainment industry 1968 1997

Establishments in the Entertainment Industry 1968-1997

1997

8916

6343

15259

1997 data from U.S. County Business Patterns; in the 1987

revision of the SIC code motion pictures was combined into

a single industry


The decreasing size per establishment

The Decreasing Size Per Establishment

Combined

Motion Pictures

and TV


California s domination of the industry measured by jobs

California’s domination of the industry - measured by jobs


Structural trends motion pictures television

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

The Post-Fordist System is also more efficient

Role of IT within

and between firms;

logistics revolution


Business process reengineering

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

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”


Globalization of major manufacturing sectors

  • 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

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

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

A Common Outcome of this Turbulence: The Product Life Cycle

Sales

Volume

Initial GrowthMaturity Decline Obsolescence

development


Examples of the product life cycle

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

Spatial Reorganization within Large Business Organizations

Dynamism in firm activities: their size, number, function, and geographic configuration

Inherent flexibility of multiplant firms - either in-situ change or locational shift

IN SITU CHANGE

LOCATIONAL SHIFTS

Reduction

of existing

capital

stock -

partial

divestiture

Investment

at new

location(s)

opening of

branch

plant(s)

Divestment

of existing

plant(s)

closure or

disposal

Relocation of

entire plant

and

equipment

Replacement

of existing

capital

stock

Expansion

of existing

capital

stock

Acquisition

of plant(s)

owned by

another

firm


Healey s adjustment framework

Healey’s adjustment framework

1

2

Operating Plant O

Plant Shut Down +

Transfer of Production

Product A

Product B

Product C

3

4

Initial Conditions

+2

2

+1

+2

2

1

1

1

+

+3

+4

+3

3

4

3

4

Mixed

Partial concentration

at an existing site

Complete concentration

at a new site

Specialization


Evolution of global corporations

Evolution of Global Corporations

Stage II

Stage I

2

o

+

1

4

1

2

3

3

 Headquarters

•Production plant

o Sales subsidiary

+ Licensing arrangement

 Acquisition

Exports

Stage III

5

+

4

2

1

3


Evolution of global corporations1

Evolution of Global Corporations

Stage IV

6

7

5

Stage V

4

2

1

o

5

7

6

9

3

8

 Headquarters

•Production plant

o Sales subsidiary

+ Licensing arrangement

 Acquisition

Exports

2

1

4

9

8

3


Summary

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


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