This action might not be possible to undo. Are you sure you want to continue?
International manufacturing and location decisions: balancing configuration and co-ordination aspects
Bert Meijboom and Bart Vos
Tilburg University, Tilburg, The Netherlands
Introduction Today, many companies have global operations. This means that the elements of the supply chain (for instance, purchasing, manufacturing, distribution) are not restricted to one particular country or region but take place on a worldwide scale. This paper is concerned with location decisions for production facilities within internationally operating companies. Discussions on international manufacturing and location decisions are often structured around Porter’s distinction between configuration and coordination. Configuration indicates the location of facilities and the interfacility allocation of resources along the value chain. Co-ordination refers to the question of how to link or integrate the production and distribution facilities in order to achieve the firm’s strategic objectives. Gregory, Steele, Shi and Grant state that, “Nevertheless, although studied extensively as separate issues, location, coordination and planning are still inadequately addressed in combination”. The international business literature recognizes that location choices can be decisive for successful international operations. The configuration issue in particular is frequently addressed, but it is approached as an international investment decision. This is a result of the economics/marketing/finance perspective of these studies. Therefore, in this literature the configuration dimension is mainly related to market pressures (cost, proximity) and internalization (protection, competitive advantage). The operations management literature also examines location decisions. The main focus is on logistical problems at the tactical and operational levels. Hence, this stream of literature is particularly concerned with co-ordination rather than configuration. Although qualitative studies on location decisions often reveal certain strategic variables (see ), the mathematical-programming based location models frequently found in operations management seldom incorporate any of them. As noted by Canel and Khumawala, in spite of the
International Journal of Operations & Production Management, Vol. 17 No. 8, 1997, pp. 790-805. © MCB University Press, 0144-3577
The authors are grateful to John Bell, Job de Haan and Hans Voordijk for helpful suggestions and comments on earlier drafts of this paper.
The crucial question preceding any decision on manufacturing investments is: how do products qualify and how do they win orders in the marketplace? In addition to price. each of which has implications for the value chain. there is also the matter of delivery speed and dependability. technical support and after-sales support. Hill. In the literature. These are all aspects that influence location decisions on production and distribution facilities. Only in the clarification of the category “organization and management” are global issues addressed. little modelling research exists on international facilities location. The Manufacturing and location decisions 791 . and Klompmaker speak of the choice of a firm’s investments in processes and infrastructure that enable it to make and supply its products to chosen markets. research on international location decisions rarely balances configuration and co-ordination questions. purchase. design. One exception is De Toni. Then an international business perspective on location decisions is presented. Global markets Publications on manufacturing strategy do not generally deal with concepts associated with international business. which are further elaborated in the experiences of Dutch investors locating plants in Thailand. In the next section manufacturing strategy. Berry.extensive modelling work done on facilities location. The discussion is centred on the operation value chain. is discussed. This paper aims to develop ideas for more integration between the two dimensions. In summary. consisting of four phases: design. and technologies. who present a framework for discussing and classifying a number of problems. manufacturing strategy is seen as that part of the operations management area that focuses on the strategic consequences of investments at the operational level. Filippini and Forza. It should be noted that the conceptual framework itself does not designate features specific to globally operating companies. This is accomplished by combining concepts from international business and manufacturing strategy. in general and at the international level. We will now discuss these issues for companies with international manufacturing activities. rarely mention international configuration issues. Three groups of strategic decision categories are distinguished: organization and management. Manufacturing strategy generally refers to exploiting certain properties of the manufacturing function as a competitive weapon. decisions and opportunities occurring in the global market. management systems. quality and product features. Contributions from manufacturing strategy. Manufacturing strategy Skinner was the first to observe that a company’s manufacturing function could do more than simply produce and ship the products. We continue with some preliminary ideas towards an integrating framework. production and distribution. the part of the operations management literature explicitly concerned with strategic consequences of investments at the operational level.
In general. state that the co-ordination of decentralized units is crucial in obtaining competitive advantages. The inputs of a factory. coordination among development centres (design phase) allows for an exchange and increase of know-how.8 792 competitive advantages of configuration and co-ordination are mentioned rather than defined and analysed. How is this global pipeline managed? How are customer orders with international multi-plant requirements scheduled? How is interplant demand scheduled? (2) Global versus local purchasing. is concerned with manufacturing strategy in global markets. and inventory objectives must therefore be balanced internationally. The international manufacturing strategy of the company as a whole must be broken down and translated into specific goals for each of the factories. centrally or by specialized plants? (3) Decomposition of overall manufacturing strategy. What are the trade-offs between global and local (perhaps just-in-time) purchasing? And how should international procurement take place. Which aspects of manufacturing (for instance. The transfer of experience can also be considered a form of co-ordination. With reference to the operation value chain. capacity utilization. while co-ordination in the purchase of materials makes it possible to obtain economies of scale. manufactured goods as well as raw materials. Customer service. Second. Finally. Moreover.IJOPM 17. These advantages relate more to how the company manages the various activities than where they are located. although the framework they propose does not have international features. can be procured abroad or from a source close to that factory. the discussion addresses co-ordination rather than configuration issues. applied production processes) need to be standardized across international plants? What is needed to . the proposed issues are interrelated and sometimes even (partly) overlapping. A further observation is that. We now turn to a contribution by McGrath and Bequillard in which international features are more easily discerned. They can be regrouped. in fact. However. specifically in the context of centralization/deconcentration of activities in the global value chain. the authors mention that modern information and communication systems enhance greater integration among phases of the operation value chain and more efficiently operating decentralized units. in the discussion of technologies. the article by De Toni et al. For example. De Toni et al. The complete order process. The authors define international manufacturing strategy as the overall plan for how the company should manufacture products on a worldwide basis to satisfy customer demand. only co-ordination is discussed in any detail. they come up with an extensive number of issues together referred to as the international manufacturing infrastructure. including inventory replenishment and production decisions takes place in an international environment. as follows: (1) International supply/demand management. and summarized.
how.maintain consistency within the overall international manufacturing strategy? How should product development and introduction be organized on a worldwide basis? These topics are co-ordination oriented: they refer to the question of how to link or integrate production facilities. which will be applied later on. the presence of particular organizational and marketing systems. it is important to consider a number of “why”. When considering how to serve a foreign market. and “where” questions regarding international expansion. who developed an eclectic paradigm of international production. particularly international location decisions. innovatory capacity and know-how. licensing or foreign direct investment. it is better not to isolate locational issues (“where”) from internalization (“how”) and ownership (“why”) issues. a contribution by Ferdows is discussed which focuses on factories in international manufacturing settings. the choice for foreign direct investment and not licensing requires an answer on “how” issues: certain knowhow and value-adding activities remain internalized. Together. based on certain capabilities (“why”). a company can choose between several modes of entry such as export. The next section is devoted to international business. His paradigm argues that firms will engage in international activities on the basis of ownership-specific. Examples are [11-13]. in an international setting. These result from extending value-added chains (or adding new ones) within the firm rather than Manufacturing and location decisions 793 . The eclectic paradigm of international production This paper aims to improve the international content of the field of manufacturing strategy. Clearly this decision has a locational dimension (“where”). Subsequently. we review an influential theory that simultaneously deals with these why. For the purposes of this paper. Below. “how”. internalization-incentive and location-specific advantages: • Ownership-specific advantages (O). in the practical part of the paper. in which the configuration dimension of international manufacturing and location decisions is presented. Examples include specific properties of the production management. • Internalization-incentive advantages (I). For instance. the firm may decide to establish its own production and distribution facilities in the host country. At the same time. in the case of foreign direct investment. they embody a framework for international co-ordination. and where questions. by using insights from international business. More generally speaking. International business The international business literature usually treats location choice in the context of international production. An important theory in this regard is provided by Dunning. These refer to the property of certain intangible assets that give the company a competitive advantage.
Strategic roles of factories An international network of factories increases a firm’s strategic options. namely: • access to low cost input factors. the O and I dimensions provide links with the strategic behaviour of individual firms. he distinguishes among three commonly reported “primary location motives”. (More generally. However. the eclectic paradigm helps to place international location decisions in a strategic perspective. In order to provide insight into how such a network should be organized. Table 4. Dunning[15. production or marketing) can be mentioned. arguing that all three of them are interrelated. It mainly addresses the configuration aspects of the decisions.IJOPM 17. Ferdows introduced the concept of the “strategic role of a factory”. A well-known drawback of the eclectic paradigm is that it is an industrylevel rather than firm-level theory. reducing physical and psychic distance and the economics of centralization (R&D. internalization yields economics of interdependent activities.) In other situations.2] also gives some tips for applying the paradigm at the firm level. Decisions to locate a particular plant are based on location-specific variables which may favour a particular (region within a) country.8 794 outsourcing the corresponding activities. In principle. The final decision on where a firm should locate its production will depend on the character of its O advantages and the extent to which one location helps to internalize intermediate product markets better than another. Dunning adds O and I aspects. It is based on two variables: (1) The primary motive for establ ishing the factory.) These include advantages gained by control over supplies or over market outlets. Thus. typical advantages are more attractive inputs in terms of price. which transforms the O. I and L advantages mentioned above to the level of individual companies. these advantages are elaborated within transaction cost economics and internalization theory. quality or productivity. • use of local technological resources. • Location-specific advantages (L). In the development of his paradigm. These are a selected set of activities which go beyond simply producing the goods. • proximity to the market. Particularly. . Lower international transportation and communication costs also fall into this category. Here. (2) The extent of “technical activities” at the site. for instance. Furthermore. No explicit attention is paid to how co-ordination between plants should be accomplished. A third possibility is higher quality intermediate or final products. as added by Teece to the standard transaction cost framework. (“Control of market outlets” is an example of the notion of complementary assets.
product development. decision making on procurement and distribution and. They mention “coordinated global manufacturing” as the classic strategy for taking advantage of low cost local resources. ultimately. Ferdows uses these roles for tracking patterns of change in the strategic role of a factory. we will show how concepts from manufacturing strategy and international business can be combined. He describes a natural evolution of plants in the direction of increasing level of technical activities. We will now proceed with some thoughts on how configuration and co-ordination aspects may be better integrated. The factors used in defining strategic roles for factories are very similar to ownership and internalization-incentive advantages as included in Dunning’s eclectic paradigm for international production.process engineering and improvement. they provide differentiated insight into international manufacturing by defining different variants of global manufacturing strategies. product customization. these . Ferdows’ theory and the eclectic paradigm are mainly configuration oriented. respectively. Second. Generic strategic roles of foreign factories Source:  Integrating configuration and co-ordination aspects In this section we return to McGrath and Bequillard and Ferdows. Gudim and McLaughlin applied these ideas in a case study of a clothing company. but offer opportunities for integration. Manufacturing and location decisions 795 High “Source” “Lead” “Contributor” Level of technical activities Low “Off-shore” Access to low cost input factors “Outpost” Use of local technological resources “Server” Proximity to market Figure 1. The upgrading of a plant’s role in global manufacturing networks requires systematic managerial attention. We have seen that McGrath and Bequillard discuss co-ordination issues extensively. The combination of the two variables leads to six generic roles for an international factory. who focus on co-ordination and configuration. aftersales service. Van der Meer. as illustrated in Figure 1. In addition. In this way. Furthermore.
focusing on individual factories without discussing the links between them. a factory in a certain country may have to serve the consumers of that country. in contrast. he is not very explicit on how to coordinate the various types of factories. Ferdows. he claims that his perspective can also help in the choice of an appropriate communication system and the organizational design of a firm’s international factory network. In another setting. Furthermore. Ferdows’s factory roles may be used to enrich McGrath and Bequillard’s description of international manufacturing strategies by investigating what kind of factories will be prevalent in each variant. Elements of the two approaches can be combined as follows: (1) Co-ordination issues as raised by McGrath and Bequillard should be used in the description of how to co-ordinate the types of factories as distinguished by Ferdows. “regional manufacturing” (a strategy that segments manufacturing operations into major markets) and “combined regional & coordinated global manufacturing”. For instance. the method . Stated differently. however. the notion of the strategic roles of factories transforms the ownership and internalization-incentive advantages of Dunning’s eclectic paradigm for international production to the level of the individual firm. For instance. discusses configuration aspects. various roles exist. However.IJOPM 17. In the next section the interaction between configuration and co-ordination will be clarified from a practical point of view. the interaction between configuration and co-ordination will be addressed in terms of the experiences with plants in Thailand. First.8 796 authors distinguish “home country manufacturing” (a centralized strategy with almost all of the manufacturing operations conducted in the home country). McGrath and Bequillard mainly address co-ordination problems and define several international manufacturing strategies without identifying the implications for the individual plant. do not elaborate on this aspect. what is the relationship between the factory types and the degree to which manufacturing is standardized worldwide? (2) Conversely. he does not elaborate on this. respectively. His concept of the strategic role of a factory provides insight into how an international network of factories should be organized. This classification clarifies that companies may have different reasons for going abroad and acquiring an existing (or building a new) factory in a foreign country. Practical relevance In this section. Thus. a factory performs just one phase of the production process very efficiently while the following phase is done in a factory in another country. in fact. on the other hand. Ferdows. We have conceptually outlined integration possibilities between representatives from manufacturing strategy and international business. As noted earlier. McGrath and Bequillard. for a factory within an international network. is more configuration oriented.
the managers of the companies interviewed were asked to verify the data in their respective interview reports. A semistructured questionnaire was used as a guide to ensure that similar information was gathered during the interviews. It contains subsidiaries of renowned multinationals competing in industries like fast-moving consumer goods. In-depth interviews were held with the management team of Thai subsidiaries. Four cases are then presented in more detail to demonstrate the interaction between configuration and co-ordination. The nature of the ownership advantage (recall ) that these “pioneers” aim to exploit. Furthermore. providing data on the key determinants of location choice and the subsequent experiences with the new manufacturing and logistics structure. is quite different from that of the large multinationals[13. on-site interviews were conducted in 1994 and 1995. followed by some general insights on locating plants in Thailand by Dutch investors.1315. The original study. The survey focused on the following issues: (1) Why did the companies decide to locate a manufacturing plant in Thailand? The information gathered on this issue provides insight into the configuration dimension. as well as the transfer of knowledge. In most cases. the responses were obtained from a Dutch expatriate manager. (2) How do the Dutch investors control the operational performance of their plant in Thailand? A number of co-ordination issues are raised concerning the international supply chain. dairy products. consumer electronics and chemicals. To ensure the quality and validity of the responses. but is also attractive in terms of market opportunities. The guide was based on the relevant literature regarding international configuration and co-ordination design[10. supplemented with Manufacturing and location decisions 797 . attempts are being made to upgrade the quality of their inward investment by promoting more capitalintensive and technologically sophisticated industries. both in terms of product range and turnover. To gather the information. Their advantages primarily come down to entrepreneurial skills to exploit local opportunities. for example manufacturers of mosquito nets and shoes.of information collection is presented.21]. Locating plants in Thailand: general findings Thailand still has the advantage of low labour costs. covers a broad variety of manufacturing operations. as well as investment projects initiated by individual Dutch businessmen. 129]. Method The companies to be discussed are derived from a study by Vos on the experiences of Dutch companies with investment projects in Thailand. from which the four case companies are derived. p. including location motives and level of technical activities.
Input is mainly aluminium and various small parts. The factory belongs to a big multinational company whose markets include the products just mentioned. “Airchair”. In-depth discussion of four case companies The practical relevance of simultaneously investigating configuration and coordination questions in international location decisions will be demonstrated by discussing four companies in the Vos study in more depth. The majority of them are supplied by the parent company in The Netherlands. Configuration For the four case companies. Only a minority reported the use of second-hand machinery in their overseas plants. which are sold in niche markets. market focus and primary motive for establishing the plant are summarized in Table I. namely access to local resources (such as technology. Australia and Asia. skilled employees). non-perishable goods as input. Many Dutch investors decided to apply state-of-the-art technology. was not mentioned by . The Netherlands in all other cases). palm oil. “Brakefluid”. The common characteristics of these companies are: • they are all production plants. Some specific characteristics are the following. Chemicals in drums are the main purchase. the headquarters is in Sydney. The companies we focus on are designated as “Soap”. initially or as part of a plant modernization strategy. “Soap” produces soap. • they mainly require bulk. Often market access was the decisive locational determinant for manufacturers of a variety of consumer goods and products aimed at industrial markets. The inputs (e. The third reason for establishing a foreign plant (recall). “Brakefluid” and two rival companies are active on the local Thai market.8 798 experience and know-how in manufacturing their specific products. the major investments in the overseas subsidiaries have been made in the past decade. in decreasing order of importance. the USA.g. Europe. usually supplied by the parent company to meet global quality standards.IJOPM 17. • their headquarters are elsewhere (Sydney in the case of “Shoes”. They have several international plants. ice-cream and tea for the local Thai market. perfume. and “Shoes”. and flavours) are almost all purchased locally. “Airchair” produces metal equipment for aircraft. A minority of the companies in the study conformed to the stereotype of (labour) cost motives in establishing a plant in countries like Thailand. Although larger multinationals usually have a long history in the ASEAN region. Design and sales take place outside Thailand. Leather and fabrics are the main purchased materials. chemicals. Though the company’s only factory is located in Thailand. milk powder. two of them in Thailand. “Shoes” manufactures speciality shoes which are global products with market emphasis on.
product improvements are initiated locally as well. In this way. The production processes of “Airchair” and “Shoes” are not sophisticated: they are traditional and labour intensive. Nevertheless. Market focus and primary location motive for Thai plants “Brakefluid” applies the same kind of simple technology used by companies all over the world producing this product. Figure 2 demonstrates that international location decisions are not just a matter of minimizing operating costs. information/knowledge. “Airchair” has more responsibilities than “Shoes” with respect to input quality control. on popular local scents and specific requirements for the Asian hair type is generated locally. (see Figure 1). Configuration: strategic role of Thai plant . Moreover. Consequently. the Thai suppliers do not perform at a sufficiently reliable level in terms of time and quality. This explains why “Airchair” scores somewhat higher than “Shoes” on the vertical axis “level of technical activities”. Therefore. it is interesting to classify the four companies according to Ferdows’s method of combining primary location motive with the level of technical activities. “Airchair” is dependent on local suppliers of which there are very few alternatives to choose from. possesses a modern R&D division for developing and producing shampoo and other hair products. even in Thailand with its cheap-labour High Soap Level of technical activities Airchair Low Shoes Cheap labour Brakefluid Market proximity Figure 2. The position of the Thai plants in Figure 2 can be clarified as follows. belonging to a big multinational. Manufacturing and location decisions 799 Cheap labour Industrial Consumer “Airchair” “Shoes” Market proximity “Brakefluid” “Soap” Table I. for instance. “Soap”.any of the companies. For certain inputs.
Internationally. adjustments in manufacturing. However. therefore. Local purchasing reduces lead times which creates more flexibility to respond to changes in demand. . they appear to have some quality problems with these inputs. expensive safety stocks are required to remain flexible. The international supply chain. there are also few alternatives. “Brakefluid” occasionally purchases locally if there is an unexpected demand. As a matter of fact. The inputs of “Shoes” and “Brakefluid” are generally purchased globally. the decision whether to source locally or globally can be seen as a trade-off between quality and lead time (see Figure 3). This is generally caused by a lack of process control in the factories of their Thai suppliers.8 800 image. we now turn to the functioning of the case plants within their respective international networks.IJOPM 17. This leads to undesirable. On the other hand. and topics related to the decomposition of the overall manufacturing strategy will be discussed. usually expensive. strict quality requirements usually imply global purchasing and thus a relatively long lead time. Moreover. They seldom have quality problems but have to deal with long lead times. rather than availability of low-cost materials.e. For instance. Often. besides lower lead-times. About 65 per cent of “Airchair’s” raw materials are delivered by the parent company in The Netherlands. This insight adds to the arguments in the more conceptual discussion on how manufacturing strategy can benefit from international business concepts. however. it shows that “how” (vertical axis in figure) and “why” (horizontal axis) questions have to be taken into account simultaneously. The choice between imported and locally purchased materials is in order. “Airchair”. if import of materials is preferred. Having discussed the locational aspects. changes in suppliers are seldom made. i. they report that “unpredictability of the market” and “lack of demand forecast”. Indeed. local supply is reported to be unreliable in terms of quality. particularly global versus local purchasing. locally. The direction of the arrow indicates an increasing share of global purchasing. Co-ordination The question of linking or integrating facilities worldwide will be dealt with in the same framework as international co-ordination. Better understanding of international production and location decisions requires the incorporation of ownership (“why”) and internalization-incentive (“how”) advantages. Maintaining a reliable flow of the crucial inputs in terms of quality and lead time appeared to be the major concern of the managers of the case companies. because other suppliers are not necessarily better and considerable time and effort has already been spent building the co-makership relation. partly owing to the strict regulations for obtaining a certification of airworthiness. derived from . Altogether. The positioning of the Thai plants in Figure 3 can be clarified as follows. rather than unreliable (lead-times of) suppliers cause supply problems. Dunning’s eclectic paradigm. Therefore. purchases a substantial part of its inputs (35 per cent).
they decide on the flows of critical components and materials as supplied by sister plants in the parent company’s global network. the internationally operating parent company is required to co-ordinate the supply of their subsidiaries. From this discussion. In addition. “Soap” has developed a vendor rating programme. it follows that one way to avoid local quality problems is to purchase globally. More generally. However. “Brakefluid” reports that central procurement planning is desirable for obtaining discounts on input prices. Then. where suppliers are rated on aspects such as product quality. Co-ordinated global purchasing maintains consistency within the overall international manufacturing strategy.Low Brakefluid Shoes Manufacturing and location decisions 801 Quality problems Soap Airchair High Figure 3. For instance. The company reports that continuing efforts in the selection and evaluation of local suppliers pays off in terms of reliable supplies. as part of “Soap’s” plans for implementing just-in-time service. one would expect even more problems with quality than a plant like “Airchair” and hence a position in the lower-left corner of the figure. does most of its purchasing locally. This increases the responsiveness to . price and plant capabilities. finally. delivery. Co-ordination: local versus global purchasing implies trade-off between lead time and quality Short (local) Leadtime Long (global) Note: Direction of arrow represents increasing share of global purchasing “Soap”. In Table II. the four case companies are compared in terms of standardization of production processes. quality control will be done by the suppliers themselves. technical service. As a result. documentation. input quality control and R&D. In the near future. this brings us to the coordination issue of how to decompose the overall manufacturing strategy into specific goals for the individual plants. “Soap” has an R&D division of hair products responsible for developing suitable products for Asian hair types.
“Soap’s” R&D division also functions as a source of information for sister plants elsewhere in the world. and its level of sophistication on the other. Company “Shoes” Table II. a configuration decision indicates an allocation of tasks and resources to a plant at a certain location. because the basic research activities are executed by the parent company. Co-ordination: decomposition of overall manufacturing strategy “Airchair” “Brakefluid” “Soap” Production processes standard 1 plant worldwide No. on the other hand. Still. The companies that are relatively highly co-ordinated appear to have a lower level of technical activities. Now let us return to the strategic role of the plants by considering the positioning of the case companies in Ferdows’s scheme (Figure 2). most of the know-how is generated in Europe. In principle. Europe and Australia. each plant different products Yes. “Soap” clearly has a larger degree of freedom than “Shoes” and “Airchair”. In Ferdow’s configuration terms the way a factory is co-ordinated correlates with the strategic role of that factory. the co-ordination of the international factory network with respect to procurement. in terms of purchasing practices and development capabilities. uniform equipment Access to technology of all other plants Input quality control Headquarters Local Not crucial Local. Interaction between configuration and co-ordination Above. Recall that the design as well as the sales and distribution of “Airchair’s” products take place outside Thailand. standardization of production processes. Similarly. sometimes even by supplier Research and development Headquarters Headquarters – Local R&D division on hair products For example. This also applies to the production technology of other plants in the network. which includes the level of local . quality control is performed in their Thai plant. These inputs are typically the materials that cannot be sourced via the parent company. The latter two are heavily controlled by their respective parent companies. an interdependency exists between the autonomy of the local plant. Apparently. on the one hand. who is in charge of quality control and ordering raw materials. “Airchair” is a bit more autonomous: for local inputs. in Sydney. R&D and exchange of know-how was discussed. headquarters controls the shipping of the finished products to distribution centres in the USA.8 802 country-specific needs. for instance. is strongly controlled by the parent company. “Shoes”. prior to shipment to the Thai plant. which “Soap” has access to.IJOPM 17. samples of leather are checked centrally. We noticed remarkable differences in local autonomy.
e. is whether certain problems in co-ordinating the international network result in modifications of the content and level of tasks of the local plants. more information is needed about whether certain problems in co-ordinating the international network affect the content and level of tasks of the local plants. A further point. stated differently. At least two questions arise from the detailed discussion of the four case companies: (1) Does a certain configuration determine the way the co-ordination is organized? (2) Can co-ordination problems alter the configuration? Conclusions and managerial implications Configuration and co-ordination aspects are addressed in different branches of the literature and are therefore seldom integrated. when describing the functioning of the plants in their respective international networks. Starting with manufacturing strategy. We have presented some ideas on how a higher level of integration can be achieved by proposing links between two representatives from each branch. we expect that combining concepts from international business and manufacturing strategy will contribute to the understanding of international manufacturing and location patterns.sophistication. it is difficult to separate configuration strictly from co-ordination aspects. it is essential to mix configuration and co-ordination aspects. thereby focusing attention on co-ordination issues. leads to a certain form of co-ordination. More generally. This was further elaborated from a practical point of view by discussing the two concepts and their interaction in the context of Dutch investors locating plants in Thailand. i. and one which requires more empirical research. more attention is required to the way in which product quality. For example. in turn. a research approach would be to translate Dunning’s ownership-specific. delivery dependability and manufacturing costs influence the firm’s international involvement (compare ). Which coordination problems alter the initial configuration? Ferdows introduced his notion of the strategic role of the factory to be able to describe specific patterns of evolution in this role. What co-ordination problems alter the initial configuration? And to what extent does a certain configuration determine how co-ordination is organized? It appeared that in analysing the functioning of the plants in their respective international networks. the changing configuration of the factory network. In terms of international business. Increased local capabilities may reduce the need for co-ordination by the parent company. From the comparison of the case companies it can be seen that a configuration decision. Or. process flexibility. Manufacturing and location decisions 803 . location-specific and internalization-incentive advantages to the tactical/operational level of the company. The in-depth comparison of four case companies generates ideas for future research.
M. for example. and Oliff.L. DuBois. These analyses should reveal the underlying forces affecting performance levels. 307-33. 3. 2..IJOPM 17. European Journal of Operational Research. some important implications for managers responsible for international location issues are derived from the experiences of the case companies: (1) Plants in emerging economies. . F. for example. M. should be treated not only as low-cost facilities. 9-40. Dynamic analyses are required to understand the sensitivity of foreign plant performance to changes in the values of key location determinants.8 804 Finally. and Grant. A. 4. “Multinational plant location as a game of timing”. case company “Soap” demonstrate that local expertise is vital to customize products to the demands of specific markets. pp. their supply chains are primarily oriented towards European circumstances. 1995.E. lower labour productivity or disappointing supplier performance is useful to develop concrete measures to increase plant performance. Knowledge of the causes of. a multinational’s previous experiences with establishing foreign plants is a valuable source of learning. foreign plants contribute to increasing a firm’s ownership advantage.B. Shi. vendor-rating programmes pay off in terms of increased supplier performance. “Changing patterns of international competition”.. Particularly the experiences of “Soap” illustrate that quality investments in. Steele. California Management Review.. The initial location study should include the question of whether local suppliers can meet these standards. 434-51. Vol. (3) The time dimension is of vital importance in location decisions. Gregory. The experiences of. 2. like Thailand. for example. A strict short-term policy to minimize material prices is likely to result in supply problems. pp. M.P. a key building-block of Dunning’s eclectic paradigm of international production. 1986. in Proceedings of 3rd International Conference of EurOMA. London. 28 No. 1996. 2. B. pp. Porter. 86. E. Toyne. development and deployment”... In this respect. Journal of International Business Studies. In this respect. pp. M. Presently. but also as potential sources of learning. “International manufacturing strategies of US multinationals: a conceptual framework based on a four industry study”. 1993. The experiences of the case companies revealed that a failure to do so often resulted in unanticipated problems in operating their Thai plants. (2) It is recommended that co-ordination issues are explicitly considered in configuration decisions.M. An increased focus on Asia’s emerging economies by European multinationals requires a shift in their strategies.. suppliers should be able to guarantee a reliable flow of input materials in terms of both quality and lead time. 267-72. Vol. London Business School. References 1.J. 24 No. Tombak. “International manufacturing capabilities: a framework to support the assessment.. Y.D. Vol. For example.
1989. 12. 1990. London. 15 No. pp. Journal of International Business Studies. Dunedin..J. Avebury. Paul Chapman. “Business opportunities in Thailand: experiences of Dutch investors”. Proceedings Pan-Pacific Conference.M. 13. Berry.L.5. and Swamidass. London Business School.J. 1995. Adam. “Profiting from technological innovation: implications for integration. 1976. (Ed. Teece.. pp. Aldershot..3. NY. 4. R. 1989. 1992. C. International Journal of Operations & Production Management.C. Restructuring Manufacturing and Logistics in Multinationals. Manufacturing Strategy: Process and Content.E.A. 6. 20. 7-18. 285-305. Buckley. S. 22. 17. W. New York. Multinational Enterprises and the Global Economy. pp. 1993. North-Holland.. Van der Meer. A. P. The Future of the Multinational Enterprise. 3. De Toni. “A mixed-integer programming approach for the international facilities location problem”... Managing Across Borders: The Transnational Solution. E. 2nd ed. C. 1992. M. Buckley. Vol. “Customer-driven manufacturing”.. 373-400. Vol. Vos. NY. “Assessing operations management from a strategic perspective”. The Economic Institutions of Capitalism. J. International Journal of Operations & Production Management.. O. Skinner.J. 1992. “International manufacturing strategies”.. 657-65. Wokingham. 21. 15. “Mapping international factory networks”. and Klompmaker. 1989. Dunning. C. 677-82. Global Shift: The Internationalization of Economic Activity. J. London. collaboration. Williamson. Vol. 1996. New York.E. 16.. 12 No. McGrath.B. 10. Ferdows. Addison-Wesley.. London.. Vol. Bartlett. B.). “Problems and developments in the core theory of international business”. J. 16 No. R.).E.M. Hutchinson Business Books. G. T.E. United Nations Center on Transnational Corporations. in Voss.. Vol. NY. Dicken. Managing International Manufacturing. B. “Manufacturing strategy in global markets: an operations management model”. Manufacturing and location decisions 805 . Canel. 7. 15. W. New York. licensing and public policy”. 14. (Ed..). pp. 1969. 11. Vol. and Khumawala. K. P. D. “Manufacturing – missing link in corporate strategy”. Harvard Business Review. Filippini. P.. 21.. NY.. (Ed. 1995. 19. 18. P. London. M. North-Holland. Chapman & Hall. Macmillan. pp.. 1993.. Managing International Manufacturing. in Ferdows. and Forza. C. in Proceedings of 3rd International Conference of EurOMA. 49-68. and Bequillard. R. 9. K..H.. 1986. 1996. 136-45.J. The Free Press. pp. Hill.J. Vos. in Ferdows. World Investment Report 1993. pp. 1997. pp. and Ghoshal. and McLaughlin. K. Gudim. and Casson M. 1985. 4-15. New York. 4. 8. International Journal of Operations & Production Management. Research Policy.M. 47 No. “The transformation of a clothing company’s international manufacturing network”.