Term Paper
Global Leadership 5601 Midterm 1. What is meant by the internationalization of a firm's value chain? How do advances in technology contribute to internationalization of firms' value chains?
Internationalization generally means global sourcing, exporting, or investment in key markets abroad. Proactive firms seek a simultaneous presence in major trading regions, especially Asia, Europe, and North America. The most direct implication of market globalization is on the firm’s value chain. Market globalization compels firms to organize their sourcing, manufacturing, marketing, and other value- adding activities on a global scale. In a typical value chain, the firm conducts research and product development (R& D), purchases production inputs, and assembles or manufactures a product or service. Next, the firm performs marketing activities such as pricing, promotion, and selling, followed by distribution of the product in targeted markets and after- sales service. The value- chain concept helps clarify what activities are performed where in the world. For example, exporting firms perform most “upstream” value-chain activities (R& D and production) in the home market and most “downstream” activities (marketing and after- sales service) abroad.
The most typical reasons for locating value- chain activities in particular countries are to reduce the costs of R& D and production or to gain closer access to customers. Through offshoring, the firm relocates a major value- chain activity by establishing a factory or other subsidiary abroad. A related trend is global outsourcing, in which the firm delegates performance of a value- adding activity to an external supplier or contractor located abroad. For example, in the same month that German carmaker BMW launched a new factory in South Carolina, an aging textile plant a few miles away, Jackson Mills, closed its doors and shed thousands of workers. Globalization created a new reality for both these firms. By
Internationalization generally means global sourcing, exporting, or investment in key markets abroad. Proactive firms seek a simultaneous presence in major trading regions, especially Asia, Europe, and North America. The most direct implication of market globalization is on the firm’s value chain. Market globalization compels firms to organize their sourcing, manufacturing, marketing, and other value- adding activities on a global scale. In a typical value chain, the firm conducts research and product development (R& D), purchases production inputs, and assembles or manufactures a product or service. Next, the firm performs marketing activities such as pricing, promotion, and selling, followed by distribution of the product in targeted markets and after- sales service. The value- chain concept helps clarify what activities are performed where in the world. For example, exporting firms perform most “upstream” value-chain activities (R& D and production) in the home market and most “downstream” activities (marketing and after- sales service) abroad.
The most typical reasons for locating value- chain activities in particular countries are to reduce the costs of R& D and production or to gain closer access to customers. Through offshoring, the firm relocates a major value- chain activity by establishing a factory or other subsidiary abroad. A related trend is global outsourcing, in which the firm delegates performance of a value- adding activity to an external supplier or contractor located abroad. For example, in the same month that German carmaker BMW launched a new factory in South Carolina, an aging textile plant a few miles away, Jackson Mills, closed its doors and shed thousands of workers. Globalization created a new reality for both these firms. By