Global Production Flashcards
types of fragmentation of production
technical and geographical
explain technical fragmentation
o Firms specialise in different stages of the production process
o Networks of firms replace a single company as the key site of production
explain geographical fragmentation
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
what drove further fragmentation of value chains post war
tech advancements
• Standardized shipping containers- reduce damage and transport costs
• Modular production- allowed modification (according to customer preference)
what drove expansion of MNCs (multinational companies)
• Technological advances combined with institutional changes (Bretton Woods)
diff between intra firm and intra industry
• Intra industry (exchange of sim products in same industry) + intra firm (resources transferred within confines of single firm) increase
2 futures of production
mass customisation and modular production networks
explain mass customisation
- Companies producing individually tailored products for little additional cost than a mass-produced product
- E.g. custom designed footwear
explain modular production networks
• suppliers making products or providing services exactly to a customer’s specifications
potentials adtangtages for modular production
• 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.
what is agglomeration + exmpale
- Firms that make similar products cluster together
o = importance of regional economies - Example: High tech industries located in small geographic location of Silicon Valley
reasons for agglomeration
- Knowledge exchange
- Maximise access to specialised resources- i.e. labour resources
- Geographic, political or economic characteristics of region
how are activities of production coordinated and integrated?
Global production networks (GPNs)
define GPN
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)
example of GNP focussing on cooperation not competition
joint ventures
significance of gpn
- 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
who is in charge of GPN and their role
lead firms
- leadership and coordination
how does a firm become a leader + example
• 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
why such extreme disparities in value distribution of GPNs
• The asymmetric power of lead firms:
how do firms exert assymettric power
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
main criticism of GPNs in high income countries
outsourcing production
why is reality of outsourcing in high income countries not same across all industries
- 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
controversies in low income countries of GPN
- 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
wider controversies go gpns
• 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
