Geography Reference
In-Depth Information
During the 1980s, these JIT and TQM ideas came to dominate the
MBA academic literature, and consequently the management practices
of those North American manufacturing firms which felt most threat-
ened by the rapidly growing competition from Japan. Most of these US
firms were MNEs, and their drive to reconfigure their production systems
was also transmitted to their subsidiaries and affiliates both within and
outside the United States. However, to avoid the problems of opportun-
ism associated with managing supply chains using these minimum inven-
tory production and distribution techniques, the widespread adoption of
JIT principles led to a new emphasis on the fostering of more long-term
inter-firm relations and a movement away from short-term market con-
tracting based solely on prices (Oliver and Wilkinson 1989). One of the
resulting insights brought about by JIT implementation was the increas-
ing realization within business and management circles that economic
geography and location were important competitive issues. JIT raised
the profile of location as a competitive factor because the innovations
introduced required much more inter-firm transactions between sup-
pliers and customers than the more traditional Western production
techniques. As such, they had the potential to significantly increase
industrial transport and knowledge transactions costs (McCann 1998).
This gave firms an incentive to concentrate their input supplier base as
much as possible (McCann and Fingleton 1996) and to restructure their
geographical shipment linkages as they rationalized their operations.
Moreover, the new emphasis on geography as a competitive factor in the
non-financial production sectors was a major psychological change in
much of US and European industry. The relative stability and domestic
protectionism of the Bretton-Woods era had fostered a myopic isolation
in many sectors of the economy of Western countries, and it was not
until the 1970s oil crisis that the effects of increasing global competition
started to become fully felt. Indeed, it was only during the 1980s that
many sectors of Western manufacturing industry first began to seriously
consider the impacts of the emerging Asian competitive challenge. Very
quickly it became apparent that these new competitive pressures at the
global level most heavily affected the large American and European
firms whose markets were more geographically diverse, and which were
therefore more directly in competition with the emerging Japanese firms.
Naturally, US and European firms tended to be MNEs. However, in
response to the new competitive environment, as well as implementing
new production techniques and managerial systems, many traditional
vertically-integrated firms which had prospered during the Bretton-
Woods era now for the first time in their history became increasingly the
subject of mergers, acquisitions, or radical restructuring, as they sought
