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

Exam

Chaps 7-9, 18 Chaps 10-14 + stockyards Student seminars Chaps 5-6 in support of the above

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

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

TNCs & Home Economies

Employment impact of Outward Investment

Bargaining Power: TNCs & States

Upon entry• Michelin bill

To reduce exit• Vote with their feet

Locational Tournaments

Macromarketing Competitive bidding for investment