Alternatives to Mass production

Question 1

Flexible specialization (=Batch production)

Answer 1

• flexible use of multi-purpose or universal machines
• skilled labor
• variety of semi-customized products
• ability to quickly shift outputs
• economies of scope in production of differentiated goods
• vertical disintegration and industrial districts
• interactions of a network of small firms
• production system as a whole flexible because each production project can be organization with a different mix of specialized input-providing firms

Question 2

Vertical disintegration

Answer 2

reduce overhead costs (administrative costs)

reduce the scope of their activities

more specialized

Question 3

Examples

Answer 3

Toyota and Fashion Companies

Question 4

Dell

Answer 4

• Just-in-time: ideals conditions to zero inventory
• custom-build computers
• buy parts from small n. of suppliers who are willing to make the investments necessary to be technologically up-to-date and to meet just-in-time needs
• VIRTUAL integration: dell signals to provide specified types and n. of components at various times throughout the day to specific factory locations
• helps them by giving real time access to order books
• if they fail, drastic penalties

Question 5

Industrial districts

Answer 5

• producers of similar goods concentrated near each other
• extended division of labor btw SMEs within a common industrial sector
• networks become an important source of competitive advance
• cooperation and competition to encourage innovation
• competition by creating new products and production processes (not price!)
• economies of specialization, information, and skilled labor

Question 6

Organization of districts

Answer 6

trust and cooperation through trade associations that control of opportunistic behavior

institutions for the resolution of disputes

Question 7

What industries?

Answer 7

many in light-labor intensive industries (clothing, furniture)

but also in technologically demand and capital-intensive sectors (electronics, films)

Question 8

Advantages of industrial districts

Answer 8

information spillovers
specialization and division of labor
development of skilled labor market
agglomeration economies: costs of production decline and firms have competing multiple suppliers

Question 9

Silicon Valley

Answer 9

• small and highly specialized firms
• compete vigorously, but also share technological info and cooperate in joint ventures in order to meed specialized consumer needs

Question 10

Vertical Keiretsu (Japan)

Answer 10

vertical group of business, formed by head group and maaany suppliers

• automobile industry
• manufacturing company benefits from tense competition btw suppliers: each supplier wanted to establish a more stable relationship without formalizing it in a legal manner

Question 11

Toyota Motors

Answer 11

• tendency to buy rather than make
• many suppliers competed (allows to compare price and quality)
• suppliers did not have a long-term contract with Toyota: any increase in cost of labor or raw material borne by suppliers, quality control responsibility of suppliers, force suppliers to compete
• just-in-time production system
• lock-in: suppliers had invested too much in this relationship
• suppliers fought to remain in the family but also to ascend the hierarchy (higher profits)
• some suppliers: Toyota gave idea and they designed and produced (higher profits)

Question 12

Toyota Auto Body

Answer 12

suppliers became independent company with its own brand and distribution channels

more capable of adapting to unexpected changes

the smaller size and the greater specialization: significant competitive advantage