How Market Competition Determines International Division Model: A Case Study of Apple, Boeing and Intel

LIU Jiejiao

Institute of Industrial Economics, Chinese Academy of Social Sciences, Beijing, China

Abstract: This paper proposes and examines four basic organizational modes of production fragmentation1in manufacturing industries based on three case studies.
Our study shows that manufacturing enterprises weigh technology and cost against the intensity of market competition in their choice of mode and the corresponding extent of production fragmentation. In industries where competition is less intense, enterprises prioritize technology concern and are inclined to choose an internally integrated organizational mode, characterized by independent investment in building their own manufacturing plants. In industries where competition is more intense, enterprises prioritize cost concern and are inclined to adopt an outsourcing-based organizational mode, characterized by maximizing the usage of third- party facilities. In sum, more intense competition prompts enterprises to seek efficiency by relying on a broader range of manufacturing locations, suppliers, and partners and, thus, to adopt more open organizational modes. We argue that a deeper understanding of how enterprises select organizational modes, combined with strategic policy aimed at promoting openness in manufacturing industries, will enhance the role of China’s industries in the global production chain.

Key words: production fragmentation, manufacturing industries, Apple, Boeing, Intel

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