The most crucial challenge for any Transnational Corporations to achieve success in today’s business world is firstly to recognize, understand and analyse the needs of the different product/market characteristics and then apply a suitable production chain to deliver the said product/service with the greatest customer satisfaction in return. In process of designing and implementation this “Production chain”, Transactional corporations face critical issues in context of globalisation.
This explanatory essay will investigate on four major topics in regards to globalisation of production chain which are: Factor influencing international location decisions; influence of globalisation on the employee practises involved in the process of production chain; spatial decisions their implications and role of government. In order to illustrate the practical applicability of the subject leading computer manufacturer named Dell Incorporation has been selected.
Introduction: Today’s world is living in the third stage of the globalisation process. In 1970 the first stage has begun when the financial globalisation started because of a deregulation of financial markets and introduction of advanced computer and telecommunication technologies as a new driving force. After a decade, it was replaced by commercial globalisation which arise due to reduction of barriers of international trade in support with development of transportation technology in the third and present stage is an era of productive globalisation where there are cavernous changes in patterns of operations and production management adopted by every organisation specially multinational/global companies which are emerging as a main drivers of globalisation (Baumann,as cited in Fleury 1999).
These multinational/global companies are becoming a Transnational Corporations (TNCs) and international operations are being replaced by global operations (Porter,1986;Srinivas,1995) . Dell Incorporation has been a set example by setting up a Global Production chain for its product and services and has become world’s largest personal computer vendor in USA and number two worldwide.
Michael Dell has started Dell Computers in a dorm room at the University of Texas in 1984 with initial start up investment of $1000 with an idea of selling a computer system directly to customer and eliminating a role of middle man (retailer) .Dell opened its first its first subsidiary in United Kingdom in 1987. After three years, to serve European, Middle Eastern and African market Dell opens a manufacturing facility at Limerick in Ireland.
As shown in figure, In 2008, Dell has spread its presence world wide by evolving a global supply chain which coordinates a global production network which is spread in America, Europe and Asia which provide employment to 89,100 people all over the globe and generate $30 billion in sale . Dell’s direct sales build to order model has been prove as super performer in PC industry in context of inventory turn over, reduced over head, cash conversion and return on investment(Kraemer, et al.,2000).
From last few years, economic commotions have become globalised in every segment. This has dual effect on TNCs and governments, for government it provides scope to raise economic growth rate of the country and at the same time for TNCs it brings enormous competitive pressures (Fleury, 1999).According to Dunning (1994), the factor which positively influence the globalisation of production chain such as technological know-how, intellectual capital, learning experience and organisational competences are becoming more mobile across the national boundaries which enforce TNCs to change the way they operate.
In order to achieve productive globalisation, production chain strategy must be aliened to global competitive strategies (Flaherty, 1996), according to Bartlett and Goshal, (1987) organisational architecture has to be redefined up to a global level so that specialisation of functions, integrated decision making and communication process and rationalisation of resources through boycotting redundancies can be achieved .
EMEA: Limerick, Ireland; Bracknell and Bray, U.K. Relationship customers are handled through Bracknell, whereas HSB customers are handled through regional centres in Montpelier, France for France, Spain, Italy and the southern countries; Amsterdam for the middle and central countries; Copenhagen for the Nordic countries; and Bray, Ireland for the UK, Ireland and other English speaking countries. The Limerick call centre specializes in higher-level technical issues, and also operates as a backup call centre when telecommunication problems occur or call volume is exceptionally high.
Asia-Pacific: Bangalore, India. Factor influencing international location decisions:- In any global production process, the location/place plays a most important role. According to Motwani et al. (1998), the global production chain provides TNCs to gain advantage of diversity in global environment by identifying and exploiting regional differences. Factor influencing international location decisions are discussed by researcher like Badri et al.(1995), Hoffman and Schniederjans (1994) and Canel and Khumawala (1996).Jungthirapanich and Benjamin (1995) .in the past when firm made a decision of international location the factors which were taken into consideration were limited such as transportation and labour cost .
However, recently there has been a increase in wide range of qualitative and quantitative factors plays an important role such as social and political factors (MacCarthy & Atthirawong, 2003). Survey findings of Badri et al. (1995) indicates that global competition and economic related factors are more serious and highly-considerable as compare to conventional factors like cost and transportation. However according to Epping (1982) theses factors are subjected to change significantly over a period of time. To understand this decision making process in practical manner, we will analyse the Dell’s location decision.