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Agenda
Last week:• Review Keiretsu model of Transnational organization• Transnational Production Networks
• Headquarters• R&D• Production
• Subcontracting• Garment Industry video
This week:• Exam
• Strategic Alliances• Economic landscape• TNCs & States
SubContracting
Commercial subcontracting• Entire product
• To spec, under principal’s brand name• Retailer – buyer-driven production network
• Producer – producer-driven production network
Industrial subcontracting• Processes OR components
• Plating, packaging OR accessory parts (buttons & zips)
• OEM vs. Aftermarket auto parts
Motives for Subcontracting
Specialty subcontracting• Specialty products or processes
Cost-saving subcontracting• E.g. sweatshop labour
Complementary/intermittant • Employment/capacity buffer
Relationships with subcontractors
Principal may provide:• Materials
• Specs & technical advice
• Finance or capital equipment Cooperation between subcontractor and
principal in design Proximity may be important Domestic or international
Strategic Alliances
Collaboration across borders Between competitors
• New rivalry, competition & collaboration
Joint Venture Networks of alliances
• Constellations of economic power
• Collective competition
Strategic Alliances as Constellations in the Computer Industry
Imagine the second tier of subcontractors!
Note international links
No archrivals
Motives for Strategic Alliances
Specific strategic objective• Sharing risk
• Sharing consequences: rewards/costs
Research• Cooperation/universities/venture capital
Technology• Sharing/cooperation/licensing
Market• Access, service infrastructure, promotion
Economic Landscape
Intra-organizational networks• HQ, R&D Labs, Production, Service agents
Interorganizational networks• SME’s, Multilocational firms, TNCs
Localized clusters• Firm-place relations (symbiosis)
• Place-place relations Embedded in regions
TNCs and States: Issues
Size of TNCs and states Cooperative and competing Supportive and conflictual
Conflicting Objectives
How are TNC/state objectives in conflict?• Performance
• Technology
• High order functions
• Responsiveness• (to whom?)
Regulatory Arbitrage
What is regulatory? What is arbitrage? What is regulatory arbitrage Belfast Public Abattoir c. 1890s
TNCs & Host Economies
Fig. 9.2! Nature of the subsidiary:
• Mode of entry
Function• Local resource processing
• Import substitution
• Export platform
TNCs & Host Economies
Potential Areas of Conflict:• Capital
• Transfer pricing
• Technology• ‘Know-how’ but not ‘know-why’
• Appropriate technology
• Trade and linkages
• Concentration
• Employment