Order from us for quality, customized work in due time of your choice.
Companies use different development and production strategies, each with disadvantages and advantages. The global production strategy of using the production resources of the whole world also has an essential advantage in the form of high-quality goods and lower costs but contains the risks of supply disruption associated with the large number of actors involved. Using the best product and service offerings worldwide to create better products. Nevertheless, the choice of a global production strategy promises several risks on an economic and political scale. The same risks are present when choosing a regional production strategy, but their importance, in this case, is lower.
The increase in the number of actors involved in the production of the finished product increases the risk of disruption of the production chain in each segment (Tintelnot, 2017). Both the deterioration of diplomatic relations between countries and force majeure events, such as the recent stoppage of trade in the Suez Canal due to the breakdown of a cargo ship, can affect this. A large number of variables in such a supply chain also leads to constantly recalculating and adjusting its plans because, unlike centralized or vertically integrated production, a company will have to conduct business relations with other independent parties constantly.
Regional production is closer to global production, as many actors and stakeholders characterize it. Still, their geographically close location helps to minimize various risks and make the production process more manageable. Moreover, in almost all regions, specific tax and customs exemptions are necessary to integrate economic processes between countries. The proximity of production centers allows the company to save on logistics and improves control over production processes. Although the use of global capacity gives several advantages because it often happens that the best components of the product are produced in a particular country, it requires more insurance, logistics, and other costs, which are compensated by the quality of the final product. The high quality of the goods results from the global production strategy aimed at cooperation with the worlds most competitive companies.
Finally, the events of the twenty-first century, with the world pandemic, the war in Ukraine, and the U.S.-China trade war, have shown how much global processes affect a companys production capabilities. Firms have had to reconsider their supply chains to consider other, perhaps less cost-effective and profitable offerings when such situations arise (Tintelnot, 2017). Regional production is more predictable in this respect because it allows the company to consider the political and economic situation of a limited number of countries or regions. In the case of a global environment, such an assessment is not yet possible.
Thus, a global production strategy makes it possible to use the best of what exists in the market and to focus on already-developed industries. Regional, centralized, and vertically integrated strategies force the company to rely on the basis that already exists or to develop it independently, which does not always lead to competitive products. Nevertheless, this strategy contains a large number of risks of a political, economic and social nature. It makes planning processes in the company more short-term and does not allow for long-term strategies or contracts. Thus, the choice of a global production strategy must consider all the potential risks that the company assumes.
References
Coe, N. M., Hess, M., Yeungt, H. W. C., Dicken, P., & Henderson, J. (2017). Globalizing regional development: a global production networks perspective. In Economy (pp. 199-215). Routledge.
Tintelnot, F. (2017). Global production with export platforms. The Quarterly Journal of Economics, 132(1), 157-209. Web.
Order from us for quality, customized work in due time of your choice.