Lana 4.2.5 Outsourcing and MNCs

Supply Chain Concepts

• Supply Chain: Network between a company and suppliers; outlines steps to produce and distribute products to customers.

• Outsourcing: Subcontracting parts of production to another company; reduces labor costs and allows focus on core competencies (e.g., R&D).

• Offshoring: Moving parts of production to another country; may involve outsourcing. Example: Ford built a factory in Manchester when entering the UK market.

• International Division of Labour: Allocation of tasks globally among countries.

• Foreign Direct Investment (FDI): Investments by one country's entities into another's economic sectors.

• MNCs (Multinational Corporations): Companies operating in at least one country other than their home country.

• TNCs (Transnational Corporations): Organizations with operations in multiple countries; handle both purchasing and branch expansions through FDIs.

Roles and Strategies of TNCs

• Core Areas: Decision-making, strategy, R&D, and marketing concentrated in developed countries.

• Assembly and Production: Typically situated in developing countries and peripheral regions.

Globalization Definitions

• Globalization: Interconnection of different places through global interactions, including FDI and outsourcing.

• Benefits and Disadvantages of Outsourcing:

  • Benefits: Increased efficiency, cost reduction, job opportunities, and leveraging existing infrastructure.

  • Disadvantages: Quality concerns, potential for unsafe working conditions, unfair practices towards low-income countries (LICs), and job loss in origin countries.

Tasks Overview

Task 1: Outsourcing

• Define key terms related to globalization, FDI, and TNCs.

• Compare outsourcing to labor migration and manufactured goods flow; analyze costs and benefits.

Task 2: FDI Trends

1. Examining FDI inflow trends from 2007 to 2018.

2. Discussing the role of TNCs in FDI processes.

Task 3: Research on Global Supply Chains

1. Research a significant multinational's global supply (e.g., Boeing, Apple, Mercedes-Benz).

2. Identify organization of the supply chain.

3. Create a supply chain overview using Google Earth.

4. Compare findings with another group's multinational.

Impact of the 2020/21 Global Supply Crisis

• Case study: Daimler

  • Unit sales decreased by 34% in Q2 2020.

  • Revenue dropped by 29% to €30.2 billion.

  • Challenges: Demand remained strong but constrained by COVID-19 lockdowns and semiconductor shortages.

Summary on Supply Chains

• Supply Chain Definition: Network linking a company with its suppliers for product distribution.

• Importance of effective supply chain systems in maintaining competitiveness, ensuring timely delivery of raw materials, and avoiding production halts due to disruptions.