Going global: strategies & issues.Although North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. will remain one of the largest automotive markets through 2010, cost pressures and globalization globalization Process by which the experience of everyday life, marked by the diffusion of commodities and ideas, is becoming standardized around the world. Factors that have contributed to globalization include increasingly sophisticated communications and transportation will make it more and more important for U.S. companies to develop global manufacturing footprints. Due to globalization, U.S. companies need to successfully sell their products to North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. market winners while also selling in overseas markets. To build profitability in this environment, businesses must reduce costs by sourcing and producing in low-cost countries. However, outsourcing has several potential drawbacks that auto companies should consider when developing a global footprint. Building a "hub-and-spoke" network When expanding to low-cost countries, companies should develop "hub-and-spoke" networks to optimize their global footprints and value-added processes. This will allow firms to operate successfully in today's global marketplace. A typical hub-and-spoke network includes a global "lead" center for research and development; regional "hubs" for pooling, sharing, and managing various key functions; "local spokes" for just-in-time manufacturing just-in-time manufacturing (JIT) Production-control system, developed by Toyota Motor Corp. and imported to the West, that has revolutionized manufacturing methods in some industries. and assembly operations at nearby customer plants; and shared service centers for engineering, drafting and overhead functions. New developments at global lead centers can be implemented across global operations Global Operations is a first-person shooter computer game developed by Barking Dog Studios and published by both Crave Entertainment and Electronic Arts. It was released in March of 2002, following its public multiplayer beta version which contained only the Quebec map. . At the same time, engineering back office activities can be outsourced in this type of network. Potential outsourcing pitfalls The rush of outsourcing to individual countries such as China poses opportunities as well as problems. Many large global companies are establishing sourcing offices in China to take advantage of the country as a low-cost supply base. Companies are achieving double-digit percentage savings on exports to the US and to the European Union European Union (EU), name given since the ratification (Nov., 1993) of the Treaty of European Union, or Maastricht Treaty, to the European Community for products such as capacitors, cable and precision-machined castings. However, low productivity levels remain a major issue in China. Though increasing, productivity rates in China are expected to remain far below productivity levels in most western or even eastern European countries for the foreseeable future. In addition, intellectual property issues in China are a major concern for many western companies. For example, a recent study by Roland Berger Strategy Consultants Roland Berger Strategy Consultants is a strategy consultancy firm based in Europe and founded in 1967 in Munich. In 2005, their sales were approximately EUR 550 million. With 33 offices in 23 countries, the independent partnership is solely owned by its more than 130 partners. in China showed that 56% of all vehicles in China are equipped with counterfeit components. Furthermore, automotive parts suppliers often feel they are under-supported by original equipment manufacturers when asked to locate facilities to new locations, such as China or India. For example, OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and support was less than expected in areas such as commitments to production volumes, allowances for investment recovery, long-term agreements and pricing guarantees. Local information sharing and logistical support from OEMs was "underwhelming un·der·whelm tr.v. un·der·whelmed, un·der·whelm·ing, un·der·whelms To fail to excite, stimulate, or impress: ." Also, cooperation on local product development and specification issues was non-existent. By Wim van Acker, Managing Partner at Roland Berger Strategy Consultants Wim_van_Acker@us.rolandberger.com |
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