Why locate manufacturing in a high‐cost country? A case study of 35 production location decisions

Abstract

In this paper, we examine in detail 35 final assembly location decisions to gain understanding of the manufacturing location decision from strategy and economic policy perspectives. We are particularly interested in the decision to locate final assembly specifically in a high‐cost (high GDP per capita) environment. In contrast with the earlier literature, we focus not just on manufacturing activities themselves, but also the key linkages between production, market, supply chain, and product development. These linkages are examined using three key concepts from theories of organization design: formalization, specificity, and coupling. Using these concepts, an analysis of the micro‐structure of each case reveals important commonalities that inform our understanding of location decisions. We conclude by discussing the policy implications of our findings.

The Impact of Strategic Operations Management Decisions on Shoppers’ Wellbeing

“…This strategy is one of the important aspects of increasing the number of visitors to a shopping mall. As it is the shopping mall operators' responsibility to select the most critical and convenient place in the market to provide service to their customers, the location of the specific sections of the mall hold important roles in offering their services (Ketokivi, Turkulainen, Seppälä, Rouvinen, & Ali-Yrkkö, 2017). These services are comparatively outstanding, such that they are unavailable online or they are so people-oriented that similar services would encourage shoppers to return to the same mall repeatedly.…”

Reimagining Finland as a Manufacturing Base: The Nearshoring Potential of Finland in an Industry 4.0 Perspective

“…Helsinki Sanomat, 2018). Although the Finnish market is small, strong coupling to it makes firms more likely to manufacture in Finland (Ketokivi, Turkulainen, Seppälä, Rouvinen, & Ali-Yrkkä, 2017).…”

“…Finland is considered a high-cost manufacturing country (e.g. Ketokivi et al, 2017), but considering actual average wages Finland might be competitive, if not with Central and Eastern European countries, then at least with countries in Finland's Western and Southwestern neighbourhood, as seen in Figure 4, which based on OECD-data (2017) depicts average wages in Finland and selected countries around it.…”

Factory strategy

“…In recent years, the reshoring of domestic plants and consolidation of domestic production facilities has progressed while developing the globalization of production activities (Ketokivi, Turkulainen, Seppala, Rouvinen, & Ali-Yrkko, 2017;Wada, 2018). The external environment of Japanese firms have also changed vastly, such as financial crises and currency fluctuations, fierce competition with firms in newly developing countries, rapidly growing complexity and digitalization of products; therefore, it is now an ongoing task to review and reorganize the global role of each business.…”