Selection Criteria: Assessing Relevant Trends and Indicators

Tobias Meyer
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Tobias Meyer: Singapore office of McKlinsey & Company

Chapter 2 in Global Production, 2008, pp 34-101 from Springer

Abstract: Abstract Centers of economic activity are shifting profoundly, not just globally but also within regions. Manufacturing footprints are transforming even more dramatically — and the story is not simply the transition to Asia. To make the right decisions on where to invest, it is critical for decision makers to understand what criteria matter the most, and how locations are likely to change. The ProNet survey showed that reducing costs and tapping new markets abroad are the two main motives for globalizing production. The two characteristics that are consistently most relevant when determining the attractiveness of a production location are labor costs and market proximity. The availability of qualified workers ranks third but is growing in importance. This ranking, however, is an average that runs across multiple products and production processes. Decision makers should be aware that the relevance of the parameters we will be discussing in this chapter depends on the specific production requirements being considered. Three categories of requirements determine what matter most: the relative importance of production input factors (labor intensity, for instance), product characteristics (e.g., value density), and the geographical scope of site selection (are you choosing between continents or neighboring industrial zones?). Another perspective to remember is that while a country may not be attractive for producing parts or finished products, it may still be appealing as a market or location for corporate functions such as back-office operations. Successful global companies manage to achieve excellent productivity and quality virtually everywhere in the world. They build on their experience, adapt their organizations to the specific circumstances they face, select appropriate manufacturing techniques, and use employment strategies tailored to the local environment. Above all, they are proactive, foreseeing the need to address these aspects early on, rather than waiting until the issues arise.

Keywords: Exchange Rate; Labor Cost; Transportation Cost; Production Network; Freight Rate (search for similar items in EconPapers)
Date: 2008
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DOI: 10.1007/978-3-540-71653-2_2

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