Global Production

Question 1

types of fragmentation of production

Answer 1

technical and geographical

Question 2

explain technical fragmentation

Answer 2

o Firms specialise in different stages of the production process
o Networks of firms replace a single company as the key site of production

Question 3

explain geographical fragmentation

Answer 3

o Stages of production located in different nations
o Driven by aim to reduce costs
 sometimes labour costs; sometimes access to technical and specialist skills; key materials e.g. land
comparative advantage

Question 4

what drove further fragmentation of value chains post war

Answer 4

tech advancements
• Standardized shipping containers- reduce damage and transport costs
• Modular production- allowed modification (according to customer preference)

Question 5

what drove expansion of MNCs (multinational companies)

Answer 5

• Technological advances combined with institutional changes (Bretton Woods)

Question 6

diff between intra firm and intra industry

Answer 6

• Intra industry (exchange of sim products in same industry) + intra firm (resources transferred within confines of single firm) increase

Question 7

2 futures of production

Answer 7

mass customisation and modular production networks

Question 8

explain mass customisation

Answer 8

• Companies producing individually tailored products for little additional cost than a mass-produced product
• E.g. custom designed footwear

Question 9

explain modular production networks

Answer 9

• suppliers making products or providing services exactly to a customer’s specifications

Question 10

potentials adtangtages for modular production

Answer 10

• a) greater dispersion of manufacturing across the globe
• b) reduced waste through greater customisation-
o e.g. product for exact requirement // no need to bulk produce volume in ranges of colour, size etc.

Question 11

what is agglomeration + exmpale

Answer 11

• Firms that make similar products cluster together
  o = importance of regional economies
• Example: High tech industries located in small geographic location of Silicon Valley

Question 12

reasons for agglomeration

Answer 12

• Knowledge exchange
• Maximise access to specialised resources- i.e. labour resources
• Geographic, political or economic characteristics of region

Question 13

how are activities of production coordinated and integrated?

Answer 13

Global production networks (GPNs)

Question 14

define GPN

Answer 14

Inter-firm networks, based on negotiated relationships, through which firms in globalised industries coordinate their activities (conception > production > delivery, all stages captured in this framing of GPNs except disposal)

Question 15

example of GNP focussing on cooperation not competition

Answer 15

joint ventures

Question 16

significance of gpn

Answer 16

• Many major industries now organised as GPNs (25% of all trade now associated with GPNs)
• Reinforce the authority of private actors in global economic governance

Question 17

who is in charge of GPN and their role

Answer 17

lead firms

- leadership and coordination

Question 18

how does a firm become a leader + example

Answer 18

• Developing innovative ways of organising production through which they gain market share
o and then defending and retaining dominance

Example: Consumer marketing – Coca Cola in agro-food sector
• Olympics sponsorship

Question 19

why such extreme disparities in value distribution of GPNs

Answer 19

• The asymmetric power of lead firms:

Question 20

how do firms exert assymettric power

Answer 20

o Raise barrier of entry: Technology, brand and retail rents (offer greater security for lead firm from competition)
o Competition at low-skill stages
o Market power of (and manipulation by) lead firms – to maintain block of other firms e.g. lawsuits b/w Samsung and Apple

Question 21

main criticism of GPNs in high income countries

Answer 21

outsourcing production

Question 22

why is reality of outsourcing in high income countries not same across all industries

Answer 22

• Typically occurs in low-skill industries (textiles) or the low-skill stages of a network (electronics)
• High value production has remained in high-income countries
• And the lead firm (often located in high-income countries) captures most value anyway

Question 23

controversies in low income countries of GPN

Answer 23

• The bad – Bangladesh
• Low-income countries likely to be at lowest skill and value stages of the network, and unable to shift to higher stages because of lead firms’ asymmetric power
• The ugly – countries reliant on the extraction and export of raw materials e.g. PNG, Angola
• Countries may get ‘locked in’ to structurally disadvantaged stages of production

Question 24

wider controversies go gpns

Answer 24

• Through GPNs, lead firms reinforce their authority and can enable harmful practices, like tax evasion
o e.g. Glencore shifting mining profits (and taxes) out of Zambia