Geography Reference
In-Depth Information
A useful comparison of evolution may be made with a region in southern
Germany, Baden Württemberg, a major car manufacturing region centred
on Stuttgart and the lower Neckar river. For this region, a principal concern is the
loss of competitiveness because of the high cost of the products, partly due to the
emphasis on quality of engineering, and partly to the high value of the German
mark. Under these circumstances, the response by the main manufacturers, such
as Porsche, Mercedes Benz and Audi, has been to use some of the principles of
flexibility, but not restrict themselves to manufacturing in the home region.
Porsche, as a smaller firm than the others, has always outsourced much of its
inputs to the assembly line, and now uses a global search for its suppliers (Cooke
& Morgan 1994). Mercedes Benz and Audi, with a heavy commitment to
manufacturing their own components, have been moving towards greater
flexibility by manufacturing a wider range of vehicles, and by moving out some
of their component manufacture to contractors. Audi, in particular, is trying to
reduce in-house production to 30 per cent of components, with the rest being
supplied. Beyond this, it receives not components, but whole subassemblies or
modules, so that responsibility for initial assembly is passed to their first layer of
suppliers, and these in turn rely on component suppliers, who may in their turn
make their components from basic parts from other suppliers.
This strategy reduces the huge responsibility and organizational requirements
for the central firm, and allows more simultaneous engineering of the
components, so that the problems imposed by a first design do not cripple the
suppliers. But it should be noted that the industrial district strategy with home
suppliers is also being bypassed, as for example by BMW, which bought the firm
Rover, partly to have better access to the British market, and partly to escape the
high-cost base of southern Germany. This strategy may prove more important
than restructuring at home.
Large firms, heavily pressured by the competition of the small firms, and LDC
competition on price, have moved themselves towards more flexible
manufacturing systems. They have also taken over some of the marketing firms,
so that changes in demand are to some extent under their control and can be
staged and planned in advance. This applies in clothing, but also to some extent
in machinery manufacture, food processing, ceramics and the rest.
Other changes are outwards movements by firms, seeking cheaper production
sites in poorer regions of Italy like Puglia or Calabria, or in poor countries,
especially for the basic production processes formerly done by workshops. Small
firms in Italy are also under threat because they cannot easily expand, having
little access to credit from banks and finance houses in a country where the
capital markets are weak. Another trend is the entry of computer-aided design
and manufacture. This technology is held by only a few firms which are usually
unwilling to share it with others, even their own subcontractors in the business.
In industry sectors such as machine tools, the problems are more severe in a
way, since research and development costs are very high and cannot be met by
