Global footprint design: Allocate and control your value chain on a global scale
2006
Globalization is happening everywhere and is affecting business all around the world. Companies need to react quickly to realize opportunities arising from globalization. They need to decide what steps of the value chain belong to their core business and how to allocate and control these steps on a global scale. This process is called the global footprint design.
Our study on global footprint design analyzes how far the process of global footprint design has already been implemented. We analyzed the value chains in the foreign market of 70 major manufacturing companies. About 25% of the participants can be qualified as global footprint champions who not only seek out global market opportunities, but who also strive to benefit from global production and sourcing activities. The remaining companies focused on limited regional or even local value chain activities. However, to benefit from untapped global potential, they need to start or intensify their activities.
The study revealed seven golden rules for the global footprint design:
- The value chain needs to be rigorously optimized as part of an international network
- Planning the global footprint begins by defining core competencies, the future product portfolio and target markets
- Select your location using a proper filter and combine global planning with local expertise
- Eastern Europe is currently especially suitable for offshoring those parts of the value chain that involve high labor costs
- Market opportunities in China can only be exploited using locally developed and manufactured products
- Global footprint scenarios must be evaluated in terms of risk and revenue – offshoring should only be done if clear synergies can be realized
- The transformation process calls for top management commitment and an appropriate timeframe
Only 20% of the study participants had not shifted certain value chain activities to low-cost locations. The study shows a clear trend towards even more off-shoring as companies establish more know-how in designing their global footprint design.
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