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Flashcards in Global Production Deck (24):

types of fragmentation of production

technical and geographical


explain technical fragmentation

o Firms specialise in different stages of the production process
o Networks of firms replace a single company as the key site of production


explain geographical fragmentation

o Stages of production located in different nations
o Driven by aim to reduce costs
 sometimes labour costs; sometimes access to technical and specialist skills; key materials e.g. land
comparative advantage


what drove further fragmentation of value chains post war

tech advancements
• Standardized shipping containers- reduce damage and transport costs
• Modular production- allowed modification (according to customer preference)


what drove expansion of MNCs (multinational companies)

• Technological advances combined with institutional changes (Bretton Woods)


diff between intra firm and intra industry

• Intra industry (exchange of sim products in same industry) + intra firm (resources transferred within confines of single firm) increase


2 futures of production

mass customisation and modular production networks


explain mass customisation

• Companies producing individually tailored products for little additional cost than a mass-produced product
• E.g. custom designed footwear


explain modular production networks

• suppliers making products or providing services exactly to a customer’s specifications


potentials adtangtages for modular production

• a) greater dispersion of manufacturing across the globe
• b) reduced waste through greater customisation-
o e.g. product for exact requirement // no need to bulk produce volume in ranges of colour, size etc.


what is agglomeration + exmpale

- Firms that make similar products cluster together
o = importance of regional economies
- Example: High tech industries located in small geographic location of Silicon Valley


reasons for agglomeration

• Knowledge exchange
• Maximise access to specialised resources- i.e. labour resources
• Geographic, political or economic characteristics of region


how are activities of production coordinated and integrated?

Global production networks (GPNs)


define GPN

Inter-firm networks, based on negotiated relationships, through which firms in globalised industries coordinate their activities (conception > production > delivery, all stages captured in this framing of GPNs except disposal)


example of GNP focussing on cooperation not competition

joint ventures


significance of gpn

• Many major industries now organised as GPNs (25% of all trade now associated with GPNs)
• Reinforce the authority of private actors in global economic governance


who is in charge of GPN and their role

lead firms
- leadership and coordination


how does a firm become a leader + example

• Developing innovative ways of organising production through which they gain market share
o and then defending and retaining dominance

Example: Consumer marketing – Coca Cola in agro-food sector
• Olympics sponsorship


why such extreme disparities in value distribution of GPNs

• The asymmetric power of lead firms:


how do firms exert assymettric power

o Raise barrier of entry: Technology, brand and retail rents (offer greater security for lead firm from competition)
o Competition at low-skill stages
o Market power of (and manipulation by) lead firms – to maintain block of other firms e.g. lawsuits b/w Samsung and Apple


main criticism of GPNs in high income countries

outsourcing production


why is reality of outsourcing in high income countries not same across all industries

• Typically occurs in low-skill industries (textiles) or the low-skill stages of a network (electronics)
• High value production has remained in high-income countries
• And the lead firm (often located in high-income countries) captures most value anyway


controversies in low income countries of GPN

• The bad – Bangladesh
• Low-income countries likely to be at lowest skill and value stages of the network, and unable to shift to higher stages because of lead firms’ asymmetric power
• The ugly – countries reliant on the extraction and export of raw materials e.g. PNG, Angola
• Countries may get ‘locked in’ to structurally disadvantaged stages of production


wider controversies go gpns

• Through GPNs, lead firms reinforce their authority and can enable harmful practices, like tax evasion
o e.g. Glencore shifting mining profits (and taxes) out of Zambia