2 management - School of International Business and ...

411 Production in the Global Environment – Analysis and Best Practices
1 THE FOCUS HAS CHANGED
The start of industrialization and mass production was driven mainly from the USA and UK at
the end of the 19th Century. While it is a common believe, that the automotive industry drove
this process, especially Ford, this change came first from the weapons industry. In the past a
gunsmith was building one gun after the other, this process was much too slow to supply an army
with newly developed weapons. So a new gun was designed based on a large number of small
parts, which were produced in high volumes and then assembled into the final product, based on
the Bill of Materials (BOM), which is still the basic concept of today’s Manufacturing Execution
System (MES).
Today, one of the major concerns for German companies moving to China, is the protection of
their intellectual properties. So special precautions have to be taken to protect them, and com-
panies have implemented certain rules. However the conflict continues while moving more and
more production to China, companies have to prevent to train them only and building up the
competitors of tomorrow. This is not a new effect and we forget that around 1880 Germany was
blamed for product piracy, copying technology knowhow from the USA and UK. Already 1885
the export exceeded the imports. Richter and Streeb [1] identified 3 phases of global industrial
growth: Phase 1: Product Piracy; Phase 2: Adaptive Innovation; Phase 3: Independant Develop-
ment. So most industrial nations went through these 3 phases: Germany starting in 1880, Japan
around 1965, Korea around 1980 and China around 2005. The big concern is the size of China
with 1.3B people, as compared to South Korea with 44M people. In South Korea companies like
Samsung and LG grew from sub-contractors to Japan into world leaders for consumer electronic
products. Extrapolating that into China’s market growth and position opens up some interesting
perspectives. If a country reaches Phase 3, product piracy is no topic anymore, since these coun-
tries are now concerned to protect their own intellectual capital, as Japan is doing for their HiTec
Industry and Germany for the Automotive and Machinery Industry. An unsuccessful attempt to
protect their own production and products was made by Great Britain on August 23, 1887 signing
the Merchandise Marks Act, which required that all products must be marked by the country of or-
igin. While it was primarily directed against German products, Made in Germany became a brand
name for competitive and high quality products, which is still valid up to today, even if the brand
name of the manufacturer became more important than the country of origin over time.
In the beginning of industrialization the factories were fully integrated, covering all processes
from design to shipment, with only very few suppliers involved, mainly for raw material. This has
changed significantly over time, and the value added activities within a company are significantly
reduced. The depth of production, for example in the Automotive Industry, is 30% for Toyota and
17% for Porsche, and everybody else in between. Visiting a car factory today, such as Mercedes
in Sindelfingen, makes this easily visible, with all of the transplants of the suppliers arranged
around the main factory. This trend is continuing, while even many well known brands in the Elec-