this. Due to its ease of transmission, existing knowledge is easily copied, so tacit knowledge tends to create more competitive advantages for businesses.
Knowledge is transferred through many routes. First, leading companies transfer knowledge to members through direct investment (FDI) projects, licensing technology consulting. Large corporations such as Intel, Motorola, Texas Instrument, Faichild have implemented this way of transferring knowledge to semiconductor assembly companies, since then have established branches in the Philippines and some countries other in Asia. They own most of the capital of the affiliates and license then transfer the entire production line. Second, the leading companies do not force suppliers to buy their machinery, but set very strict technical standards. The leading companies have indirectly pressured local suppliers to buy more modern machines to improve productivity. Mando, a major auto parts maker in Korea, has purchased a robot to automate the production process. Each such robot is an expression of cutting-edge technologies that have been transferred to other countries. Third, leading companies can transfer knowledge to local suppliers directly through contract manufacturing of original designs. Knowledge is transferred through documentation, engineering blueprints, technical manuals, and most of all, free of charge. For example, Boeing aircraft hires suppliers in Japan, Taiwan, and South Korea to manufacture some of the fuselage parts, so Boeing passes on to local suppliers a blueprint to build the fuselage. flight, technical support documents to help them fulfill production requirements. Wednesday, Knowledge can also be transferred through the exchange of labor. Every year, low-level suppliers in Asia still go abroad to visit the production activities of leading companies to learn production skills. Moreover, some of the skilled engineers at the big companies in the network are also sent to other countries to work, supporting local suppliers for a while. Labor mobility, learning experience
Foreign countries help local suppliers in a short time acquire and master new technologies.
IV. Some key factors affecting the formation and development of the global production network
4.1. Economic globalization and the changing nature of competition
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The process of liberalization began in the early 1970s and developed rapidly in response to the collapse of the fixed exchange rate regime and rampant inflation. The government has made liberalization proposals, while other organizations: financial institutions, valuation departments, multinational institutions (bilateral, multilateral treaties, regional integration blocs) sector) gradually formed also played an important role in the formation of the liberalization trend. Liberalization includes all four aspects: free trade, free flow of capital, freedom of investment policy, privatization. Liberalization provides easier access to markets and access to resources and productive capacity outside corporate and national borders.
The process of liberalizing and reducing barriers to international trade and investment combined with the rapid development of information technology has fundamentally changed the global competitive landscape of MNCs. MNCs have to find ways to access new markets, cut production costs and shorten product life cycles. Globalization makes competition no longer limited to the domestic market but to the international market, the competition becomes more and more fierce.
4.2. Restructuring and changing production organization in enterprises
It is the change in the competitive environment that causes businesses and MNCs to find ways to change their operating structure to be more flexible. The vertical organizational structure that has existed for a long time in enterprises is now gradually shifting to a flat organizational structure according to cross-functional boards. It's that compact structure
making businesses unable to embrace all production stages but must focus on the main production activities with higher value and outsource other activities. Each enterprise needs to find its competitive advantage and determine its position in GVCs. This restructuring was made possible through the development of technology that linked individual manufacturing operations together. Enterprise structure needs to change to match the current competitive process, and this change in organizational structure allows enterprises to specialize more deeply. Therefore, in GPNs, there are many types of companies involved.
4.3. Foreign Direct Investment (FDI)
FDI plays an extremely important role in the formation and development of GPNs. FDI capital from leading companies investing in other countries forms an industrial concentration in certain regions, thereby creating a foundation for external links. At the same time, FDI contributes to orienting the position and role of other countries in the GPNs. The direction of host country FDI in host countries will determine the sector in which that country participates in GPNs. Japanese economist Shojiro Tokwaga asserts that it was Japanese FDI that led to the formation of RPNs. This network forms a production structure that is not intended to serve the domestic market, but to directly serve the needs of the European and American markets. Japanese FDI differs from the US and Europe in terms of motivation, the form and impact of the investment on the host country. First of all, Japanese FDI tends to be commercial activities and is very evident in the form of joint ventures in production and open technology transfer. Japanese FDI is aimed at the economic development of the host countries and from there these countries have the opposite effect, complementing the economic development of Japan. Meanwhile, the purpose of FDI in Western countries is only to seek profits for its companies. Because of this difference, the GPNs of each leading company, in each region, have many different points. Japanese FDI is aimed at the economic development of the host countries and from there these countries have the opposite effect, complementing the economic development of Japan. Meanwhile, the purpose of FDI in Western countries is only to seek profits for its companies. Because of this difference, the GPNs of each leading company, in each region, have many different points. Japanese FDI is aimed at the economic development of the host countries and from there these countries have the opposite effect, complementing the economic development of Japan. Meanwhile, the purpose of FDI in Western countries is only to seek profits for its companies. Because of this difference, the GPNs of each leading company, in each region, have many different points.
V. The role of the global production network
5.1. GPNs for businesses
It can be said that the production network shows high production specialization. Each country participating in the production network can take advantage of its competitive advantage, so every country can benefit. However, depending on the level of participation of that country in the global production network, and the current level of that country, the benefits to each country are not the same.
Most enterprises in developed countries have strong potential so they play the role of leading companies in PNs. Dispersing production outside national borders first helps leading companies easily access new resources such as: human resources, raw materials, materials... Human resources here include low-level and high-level workers. Obviously, if businesses have access to abundant raw materials and cheap labor, production costs will be reduced. Although in the production network there is only knowledge spillover from leading companies to local suppliers, in less developed countries it is still possible to find some people with managerial qualifications. management, high technical level. Therefore, the diversification of human resources helps leading companies to gather many options, have the opportunity to use new resources to enhance the creativity of enterprises. Second, leading companies, when dispersing their production to foreign markets, will have easier access to new markets. This is because almost the entire product production process has been taken out, by local suppliers, so the transportation of goods and products to the market is significantly reduced. easily avoid tariff barriers.
Local manufacturers, when associated with leading companies (usually large enterprises with leading positions in the industry) will enhance their position in the market. A feature of production networks is the process of transferring knowledge and technology. Each local supplier, when participating in the network, acquires technology, knowledge, and management methods from the company.
ship leader. This process of acquiring knowledge takes place continuously so it will gradually contribute to building production capacity for suppliers in less developed countries. Initially, suppliers are just original model manufacturers (OEMs), but after a long process of acquiring knowledge and technology, they are able to switch to original design (ODM), even become original brand creators (OBMs).
5.2. GPNs to the national economy
GPNs are a manifestation of a highly globalized process. In GPNs, there is the association and cooperation of many businesses in different countries, so GPNs strengthens economic relations between countries in the same production network. The cooperation between members of GPNs through many channels can be in the traditional way of FDI, it can also be in the form of joint ventures, copyright contracts, or strategic alliances. These forms of cooperation help countries in the GPNs attract the attention of foreign investors. Therefore, although FDI plays a role in forming GPNs, on the contrary, participation in GPNs has the effect of promoting FDI inflows into a country.
Furthermore, participation in GPNs also promotes the growth of trade, especially intra-industry trade. We clearly see the close relationship between production stages when divided into different geographical areas. The output of one production block becomes the input of another production process. To coordinate activities in GPNs the output of each production block must be exchanged with each other through commercial activity. Therefore, the more GPNs develop, the more trade exchanges between countries increase.
Thanks to the process of technology transfer, developed countries have the opportunity to develop their industries and catch up with other developed countries. Initially, it was just a change in the production capacity of each individual enterprise, but if appropriate policies are in place, the production capacity of the whole industry will be enhanced.
In addition, the process of industrial agglomeration of GPNs contributes to the formation of industrial clusters and concentrated industrial parks in countries that have joined the GPNs. These industrial centers create an important premise for the development of the country's own industry. Therefore, participating in GPNs helps developing countries build production capacity, develop industries towards industrialization and achieve high growth rates.
5.3. GPNs for the regional and world economy
It can be said that GPNs play an important role in promoting the regional and global economy. The association of businesses in a certain geographical area or around the world within the framework of GPNs activities creates opportunities for all countries to achieve added value and prosperity. Therefore, the formation of GPNs will promote the economic development of all countries, shortening the gap between developed and developing countries. Moreover, GPNs create a unified network that contributes to the rapid production of regional and global production, reducing costs and resources. At the same time, the level of specialization in GPNs is much higher than in traditional commercial models, so it creates higher labor productivity. At the same time, this specialization also promotes each enterprise, each country is constantly improving and enhancing its level and capacity. It is a constant driving force for development. If a global production network is formed, it will promote technology and increase labor productivity worldwide.
In general, GPNs bring benefits to businesses, each member country, thereby bringing many benefits to the regional economy in particular and the global economy. GPNs also strengthen linkages between economic sectors, creating specialization among these sectors.
CHAPTER 2
DEVELOPMENT STATUS OF GLOBAL MANUFACTURING NETWORK
I. Global production networks in several industries
1.1. Production network in the electronics industry
1.1.1. Changes in the electronics industry
The booming new economy in the US has created a trend of vertically specialized manufacturing in the electronics industry with a high degree of specialization. Companies began to move production to countries with low production costs, especially China. New companies appear in the electronics industry, especially in the areas of hardware, software, computers, computer services, Internet equipment, mobile devices such as laptops, or digital support devices. Personal assistance has changed the face of the entire industry. During the 1970s, emerging companies, especially new generation Chip manufacturers such as Intel, National Semiconductor or AMD, Apple, Microsoft and Compad... created Silicon Valley in California. Unlike first generation computer companies (IBM, Digital Equipment in the US, Fujitsu in Japan or Siemens in Germany), Silicon Valley companies do not produce an entire computer system, but only a few core components such as microprocessors and operating systems. Electronic devices are assembled from standardized components such as: chips; operating systems, drives, screens… These components are all purchased from other companies, and then assembled in different ways, resulting in distinct products between companies. The Silicon Valley production system is a highly specialized vertical system [47]. Some of them such as Intel, Microsoft, Sun or Cisco have acquired a dominant position in the market. operating systems, drives, screens… These components are all purchased from other companies, and then assembled in different ways, resulting in distinct products between companies. The Silicon Valley production system is a highly specialized vertical system [47]. Some of them such as Intel, Microsoft, Sun or Cisco have acquired a dominant position in the market. operating systems, drives, screens… These components are all purchased from other companies, and then assembled in different ways, resulting in distinct products between companies. The Silicon Valley production system is a highly specialized vertical system [47]. Some of them such as Intel, Microsoft, Sun or Cisco have acquired a dominant position in the market.
The growth of the new model in the industry has resulted in a large number of subcontractors appearing. Subcontractors are usually small companies in
High-tech centers like Silicon Valley, in charge of assembling circuit boards with standard parts such as resistors, coils, cables. During the 1990s, a new type of assembly company emerged called contract manufacturers (CMs), which were large-scale companies that provided joint production services to manufacturers. The company creates the brand. However, the manufacturing processes of the CMs are controlled by the original equipment manufacturers. The CMs must meet the specifications of the OEMs. Compared to traditional assemblers, CMs provide all elements of the manufacturing process including product construction, circuit board assembly, final assembly and computer configuration, equipment as well as sales, distribution, and repair services[48]. Flextronics has established 62 factories in many countries around the world and built many factories and manufacturing plants in 70 countries. SCI also has 100 factories set up around the world. The number of contract manufacturers during 1996-200 increased by 50% and total income during the period increased fourfold[10].
Through the acquisition process, CMs act as network builders, linking many factories with other manufacturers in a particular market or region. In 1996, Selectron, a leading contract manufacturer, was present in 10 regions of the world; By 2000, there were nearly 50 branches worldwide [53]. CMs strive to be present in the world's capitalist economic triangle and combine the leadership of leading economies with mass production technology in developing countries. For North America, Mexico is a market with low production costs, Asia has Malaysia, China (China has the largest number of factories of CMs in the world), with Europe is Hungary, Finland , Czech Republic, Romania [50].
The advent of “just-in-time” has transformed the traditional international division of labor based on manual assembly and simple technology into another category. Production, technology and growth rates in developing countries are smaller than in developed countries. The entire production process in low-cost areas is controlled by the pressure and technical standards set forth by the CMs.