(across functions/activities that may be concentrated in different countries) ○ E.g. new product development requires integration of R&D, Marketing, Production ○ Close integration between R&D and marketing to ensure that product development projects are driven by the needs of customers. ○ Integration between R&D and production to help a company design products with manufacturing requirements in mind. ⇒ HQ as coordinator rather than controller and the use of strong integrating mechanisms ➢ Demands on employees (and suppliers): ○ working with team-members in other countries (issues of cross cultural literacy; adjusting to different time zones; travel, esp. for managers with international responsibility); ★ Vulnerability to higher costs ○ Adverse currency fluctuations, hikes in transportation costs (e.g. high oil prices a few years ago); high tariffs and other barriers; higher than anticipated set-up and operational costs (due to poor infrastructure, training) ★ Vulnerability to weak legal environment: inadequate laws and enforcement regarding IP, red tape, corruption ★ Long term: climate change abatement schemes leading to higher transportation costs and change in customer attitudes (e.g. “food miles”) ★ Risk of supply chain interruption ○ More specifically, risk inherent in concentrating one entire aspect in a single location (e.g. natural disasters, political crises, terrorism) Reversal of fine-slicing Increasing trend towards insourcing and captive sourcing. ★ Global labour arbitrage in wage rates declining ★ Increasing industrial automation and digitisation (eg. of manufacturing and marketing) ★ More effective value creation from doing it themselves ○ Reshoring manufacturing to be closer to R&D or onshoring to be closer to big customer markets ○ Rethinking what’s core and non-core (e.g. customer relationship management, IT)
LISA YANG IBUS20002 Business in the Global Economy ○ Greater reliability in intellectual property protection ⇒ Opportunity for rich world countries to win back some industries and activities but must improve competitiveness (skills and training, worker flexibility and motivation, supplier capabilities..)
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