Title: Globalization of Major Manufacturing Sectors
1Globalization 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
2Changing Geography of U.S. Manufacturing
31990-2000 Change Manufacturing Employment
U.S. Total -3
4Date of Maximum Employment in Manufacturing
5Urban-Rural Manufacturing Trend 1991-2004
6International Movement of U.S. Manufacturing
- Rise of F.D.I.
- Shifting locations of F.D.I.
- 1945-1960 Canada Latin America
- 1950s Western Europe
- 1960s onward a global reach
- Cumulative employment abroad of 500 largest U.S.
corporations equaled domestic employment - Most investment in advanced economies
7Global Employment of U.S. MNCs
China?
8Key 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
9The 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
10From Fordist to Flexible Production
11The 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!
12A new regime of accumulation?
- (1) The emergence of clusters of small firms,
including co-ops - (2) Flexibility related to new machines
- (3) Labors 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
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14Emergence 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
15Flexible 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
16Flexible 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 1950s - 1970s, with
consequences in the 1980s
17Productions by Organization Type
Number of productions per year
151 190 207 243 222
18The Proliferation of Establishments
19Establishments 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
20The Decreasing Size Per Establishment
Combined Motion Pictures and TV
21Californias domination of the industry -
measured by jobs
22Structural 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
23The Post-Fordist System is also more efficient
Role of IT within and between firms logistics
revolution
24Business 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
25Downsizing 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 Friedmans flatteners
26- Friedmans Ten Flatteners
- Outsourcing
- Offshoring
- Open- Sourcing
- Insourcing
- Supply Chaining
- In-forming (search engines)
- The Internet
- Fall of the Berlin Wall
- Netscapes Public Offering
- Work Flow Software
- The Steroids (Digital,
- Mobile, Personal and
- Virtual)
- He argues together they have
- allowed unparalleled
- collaboration
27The 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
28Labor Productivity and IT Intensity
All
Less IT Intensive
GDP/FTE Growth
Error in Legend!
Source Digital Economy 2003
29A Common Outcome of this Turbulence The Product
Life Cycle
Sales Volume
Initial Growth Maturity
Decline Obsolescence development
30Examples 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 Campbells Soup -
31Spatial 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
32Healeys adjustment framework
1
Operating Plant O Plant Shut Down Transfer
of Production
2
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
33Evolution 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
34Evolution 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
1
2
4
9
3
8
35Summary
- 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 Schumpeters process of creative
destruction is fueled by IT, logistics, and the
rise of new production regimes built around more
flexible manufacturing systems