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The following article was published in our article directory on August 26, 2010.
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Global Manufacturing Network and Upgrading of Enterprises in China

Article Category: Business Management

Author Name: xia zihui

Global manufacturing network is the next wave of globalization, the gradual formation of a new organizational structure changes, characterized by increasingly widespread and systematic use of global manufacturing system. Global manufacturing network is a new manufacturing system, which includes different stages of the value chain, but not necessarily between the entities involved in ownership of each other; the network is an important organizational innovation, it makes the emergence of multinational corporations better able to deal with their own specialization, and cooperation with the host enterprise in the conflict.

With such a global manufacturing network, although help developing countries take off or low-end stage of the process of industrialization, but in developing countries to high-end process of industrialization, but there has been extensive, "capture" phenomenon, accurate speaking, developing country participation in GPN local enterprises or network, in the realization of the value chain from low value-added part of the value chain to higher value-added part of the process up, especially after the upgrade feature to upgrade or chain encountered International buyers in developed countries or multinational double check and control, and is limited to low value-added, shrinking profit margins in the value chain of low-end manufacturing sectors.

Pinggu Chinese violin industry base in the village in Pinggu District, East High. Violin world output of 1 / 3 from the village of East High, but the world's most famous violin brand is not here, even though it may be from East High Village. East Village, violin high for a large number of OEM and international buyers in control of marketing channels, the East Village has been locked in low-end high-production manufacturing sector, can only earn low processing costs.

East almost every village are engaged in high violin production, but each family is mostly limited to the production of a violin part, so that one hand can increase labor productivity, more importantly, each family or each working participant The violin does not have full capacity, and therefore can not demand higher wages.

This global manufacturing network under the East Village violin industrial base with high low-end lock is too similar!

This industry is not only a violin, a lot of labor-intensive industries in China have similar difficulties, and even "tragic growth."

Tragic growth: global manufacturing network in China under the plight of

Tragic growth is biased when a country exports factors of production boom in exports increased, not only did not bring the country's export income and welfare levels are increased, but is reduced. Our textile industry to illustrate the global manufacturing network embedded in the Chinese manufacturing difficulties.

Since the reform and opening up, by undertaking the third international transfer of textile and garment industry, textile and clothing products have become the most important export product. China's textile and garment exports in 1994 amounted to 20.23 billion U.S. dollars, increased to 115.07 billion U.S. dollars in 2007, an increase of about 468.8 percent, an average annual growth rate of 14.3%. However, rapid growth in the textile and garment exports, while the average unit price was declining, textile and garment exports in 1994, the average actual price was 0.75 U.S. dollars, fell to 0.48 U.S. dollars in 2007, only 64% of the original, showing a "tragic growth "The typical characteristics.

Average unit price of Chinese textile and garment exports decline, from the theoretical analysis may be caused by the two reasons: First, its labor productivity gains reduce production costs, resulting in lower prices; second, under the global manufacturing network is locked in the low-end link, the price to be the most important competitive advantage, competitive advantage and this is most likely to be replicated, so the other competitors in the global manufacturing network must be under threat at all times maintain this competitive advantage. In fact, the average unit price of Chinese textile and garment exports decline is mainly from the second reason. Textile and garment industry after 2000, profit margins steady at 5%, lower than the 6 | 8% over the same period the manufacturing sector the average profit margin, into the so-called "small profit" period. From the average wage of view, and since 1996 the real wages of workers in the declining trend in the basic and more decline in profit margins decline, indicating that the export prices of the sacrifices primarily by the commitment of industrial workers. These data demonstrate a strong capture type GPN to join the Chinese textile and garment enterprises are facing a deterioration in income distribution, into a "tragic growth" position.

Internal and external problems: the shackles of industrial upgrading in developing countries

Generally agreed that there are four different levels of upgrade: process upgrading, product upgrading, functional upgrading and chain industry to upgrade. Upgrading of the above four methods, many studies show that there is some of its internal rules to follow. Generally agreed that industrial upgrading in general follow from the process and then to upgrade to the product upgrade feature to upgrade industry and then to chain the last upgrade this law. Under the global manufacturing network enterprises in developing countries generally are in the OEM stage, the OEM ODM or OBM leap toward the mark of developing countries in global manufacturing network system up under the status. More and more developing countries are actively engaged in industrial upgrading, but the results are not very satisfactory.

GPN in a strong buyer power technology from developed countries, the integration of forces and market forces. Developed the technology using their own innovative capability accumulation and adequate size of the high-end home market demand as the world's new technology, new ideas, new product source Hatchi He needs Shichang new pioneer Youci pairs of developing countries in an asymmetric bilateral of buyer power. GPN in buyer power on the growing non-production activities has a strong control ability. Leading business focus and investment in these activities, and to be treated as a core competency. To obtain supply their own needs Di Shang, international Goumai operators to provide Jishu, contractual arrangements, Yun Shu, Jiesuan, human Ziyuantouru even be given financial support, which in itself is given of Chanye cluster links.

But this investment and support into the larger, more buyers do not want to upgrade the cluster function, after all, competitors also need to increase an additional investment to find new suppliers. In the GPN in the party giving the brand manufacturers, is trying to achieve cross-functional upgrade of OEM business in front of an insurmountable Hom, OEM business is bound with the functions of transformation of conflict of interest. In this way, international buyers have set up obstacles. And credible threat to the OEM business: If you reclaim back the OEM orders to others what I had. Existing brands in the "threat", the developing countries at present very few OEM companies to truly cross this step. And, OEM, ODM to OBM upgrade jump, the original OEM buyers who are bidding to replace the status of those who mean the original foundry with advanced face to face in the global market competition contest.

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