Why Go Global? The Multinational Imperative

Globalization is not a new phenomenon. The networking of the world’s economy has been evolving for centuries, with companies gradually expanding beyond their national borders. What is new is the dramatic acceleration of this process. The rapid networking of global communications is being mirrored by web-like value chains that increasingly span the world. Global production provides an unparalleled opportunity for companies to grow into new markets while at the same time boosting their competitiveness. However, most of today’s networks are legacy structures - only a fraction were strategically planned. As a result, there is huge potential to be captured from rethinking traditional structures, approaches, and supply relationships. And huge potential for getting it wrong. Our survey showed that production network redesign can cut a company’s manufacturing costs by up to 45 percent - but over half the players achieved savings of only 10 percent or less. This book focuses on the three industries covered by the ProNet survey: automotive engineering, machine tool manufacturing, and electronics. Their profiles are all very different, whether we look at the footprint and corporate history of key players, market characteristics, product and production technologies, or their cost structures. The beauty is that this breadth makes the results representative far beyond these three sectors. Their patterns and drivers can help to identify optimal global networks throughout the manufacturing industry. This first chapter lays the groundwork by elucidating the historical background to globalization and reviewing the drivers and goals of the current race to go global. It then examines the status quo of our three focus industries, with an overview of their survey findings. The rest of the book, based on the results of that analysis, offers practical guidance for companies planning to reconfigure their global footprint.