Global Production

JiJun Xia & Yaching Chang 2 Effects of Globalization Fragmenting activities in all stages of production. Performing activities in different countries and reintegrating them through production systems. Global production brings opportunities and challenges.

JiJun Xia & Yaching Chang 3 Opportunities Entering foreign markets Earning more foreign currencies Diversifying exports Getting new skills, knowledge, and technology Extending the scope of gains

JiJun Xia & Yaching Chang 4 Opportunities…(cont.) Benefiting latecomers not having the industrial base of the first movers and advanced capital markets and financial institutions Stimulating the more business-friendly environments.

JiJun Xia & Yaching Chang 5 Challenges Much competition Prices down Production and technological capabilities up Smaller suppliers survive difficultly

JiJun Xia & Yaching Chang 6 Challenges…(cont.) Even successful companies hardly sustain competitiveness. Still, some countries have succeeded to use the opportunities from this new business condition. Ex: Asian countries high-technology-intensive products

JiJun Xia & Yaching Chang 7 Global value chains and global production networks Global value chain analysis: i.Strategic global dispersion ii.Possibilities for technological and industrial upgrading Global production Network analysis: i.Flagship firm’s production network ii.How it is dispersed iii.Transferring technology

JiJun Xia & Yaching Chang 8 What are Global Value Chains ? Value chains include a sequence of related activities.

JiJun Xia & Yaching Chang 9 Global Value Chains The market structure influence innovation possibilities Low-income, price elastic markets process innovation High-income markets product innovation

JiJun Xia & Yaching Chang 10 What are global production networks ? GPN participants at different hierarchical layers: growth, strategic direction, and network position A global production network can participate in different value chains

JiJun Xia & Yaching Chang 11 Global Production Networks

JiJun Xia & Yaching Chang 12 Global Production Networks…(cont.) Production networks may compete with each other in a product-specific value chain, but they may also cooperate. Ex: Solectron & Flextronics Dell is a flagship firm that works like a brand leader.

JiJun Xia & Yaching Chang 13

JiJun Xia & Yaching Chang 14 Organization of a Global Production Network In 2001, Dell Computer became the world ’ s largest personal computer vendor. Dell ’ s business model is simple in concept, but very complex in execution. Building PCs to order

JiJun Xia & Yaching Chang 15 DELL ’s Partners…

JiJun Xia & Yaching Chang 16 Dell ’ s Value Web Model

JiJun Xia & Yaching Chang 17 Dell ’ s Value Chain

JiJun Xia & Yaching Chang 18 Global Organization Dell is a global company operating in 34 countries in three world regions, with about 35,000 employees and $30 billion in sales. Dell is organized along geographic lines into the Americas, Asia-Pacific, and Europe/Middle East/Africa (EMEA).

JiJun Xia & Yaching Chang 19 Global Organization

JiJun Xia & Yaching Chang 20 Global Organization… (cont.) We heard this explanation several times in interviews with Dell people in the EMEA region. They pointed out that Dell EMEA deals with 13 different languages, 18 different currencies, and 18 different tax rates whereas Dell North America deals has only 3 different languages, currencies, and tax rates… … Source: Dell Website

JiJun Xia & Yaching Chang 21 Global Organization… (cont.)

JiJun Xia & Yaching Chang 22 Location of Manufacturing 1990: Opens manufacturing plant in Ireland 1996: Opens manufacturing plant in Malaysia 1998: Opens manufacturing plant in China 1999: Opens manufacturing plants in Tennessee and Brazil

JiJun Xia & Yaching Chang 23 Location of Manufacturing…(cont.) What should take into consideration…??? General Location Factors Market access Labor costs and quality Transportation and telecommunications infrastructure Government incentives Industry clusters

JiJun Xia & Yaching Chang 24 Outsourcing

JiJun Xia & Yaching Chang 25 Outsourcing…(cont.) While sourcing of materials for PCs (major components and systems) is done centrally, sourcing of consumables is local (box and shipping material, printing of keyboards, printing of manuals, etc.). The majority of sourcing is from low cost suppliers in Asia, but some sourcing is from local producers.

JiJun Xia & Yaching Chang 26 Impacts of Dell’s Location on Supplier Location With so many different suppliers and partners involved, the location decisions of these companies naturally vary by company and location. Many parts and components are manufactured. For instance, Solectron and SCI supply Dell’s U.S. plants from their plants in Guadalajara, Mexico, and from plants in the U.S.

JiJun Xia & Yaching Chang 27 Supply Chain

JiJun Xia & Yaching Chang 28 Dell’s Other Operations Call Centers Dell makes extensive use of call centers, both for sales and for technical support. Dell generally organizes its call centers around its major customer segments with different call centers for relationship and transaction customers.

JiJun Xia & Yaching Chang 29 Dell’s Other Operations Marketing, Sales and Support The sales, service and support functions are located in the individual countries because these activities must be close to end customers. As a result, Dell has sales and service offices in 34 countries around the world, usually in a large urban area and with multiple offices in some countries.

JiJun Xia & Yaching Chang 30 Dell’s Other Operations IT and Data Centers A network of data centers supports Dell’s sales, manufacturing, logistics and other operations. Global applications, such as online sales tools, order management and supply chain management.

JiJun Xia & Yaching Chang 31 Dell’s Facilities In US

JiJun Xia & Yaching Chang 32 Reaction to Market Slowdown in 2001 Dell was the only PC maker to show any growth in sales in 2001, but it still saw much slower growth than the 30-50% annual gains it was used to. In order to cut costs, Dell laid off about 5,000 workers, mostly in the Austin, Texas area. About 600 workers were laid off in Europe.

JiJun Xia & Yaching Chang 33 Conclusions Dell has become a global company with global production networks in Americas, EMEA and Asia-Pacific. Market potential is the driving force behind Dell’s general location decisions. Dell has organized its operations by region and by country.

JiJun Xia & Yaching Chang 34 THANK YOU