FAMG 1003 (BH) — Chapter 4: Manufacturing

Companies that operate in multiple countries. They are involved in manufacturing, production, and sales activities across international borders.

The period of rapid industrialization and technological advancement in the late 19th century, marked by the rise of new industries like chemicals, automobiles, and machinery.

The process of manufacturing a product in a different country than where the company is headquartered, often to take advantage of lower costs or access to a specific resource.

A primary reason companies choose to manufacture in other countries is to reduce production costs. This can be due to lower labor wages, cheaper materials, or favorable tax policies.

Siemens and Halske, a German company, established workshops in Russia and England during the mid-19th century to install and maintain their telegraph and cable equipment.

Singer, a US sewing machine company, is considered the first successful multinational manufacturer. By 1914, it had factories in various countries, including Scotland, Canada, Austria, and Germany.

The textile industry, particularly cotton production, played a significant role in British exports during the 19th century.

Iron and steel production, along with machinery, constituted a considerable portion of British exports alongside textiles during the late nineteenth century.

Easy access to capital contributed to the growth of British firms. The developed London capital market allowed for cost-effective funding.

Close relationships between banks and industries in continental Europe facilitated multinational manufacturing.

Swedish, German, and Swiss banks played a significant role in supporting companies' international expansion.

Tariffs, or taxes on imported goods, made importing less attractive compared to manufacturing directly in the foreign market.

Non-tariff barriers to trade, such as government restrictions and nationalistic sentiments, encouraged manufacturing FDI.

Nationalistic feelings sometimes led governments to favor local producers over foreign companies.

Patent legislation, especially in Canada, influenced companies' choice between exporting and investing directly in production.

General Electric's (GE) investment in local electrical companies exemplifies how companies responded to nationalistic sentiments.

Anglo-Swiss Condensed Milk Company started in 1872 and expanded to the US 10 years later. By 1914 the company manufacturing condensed milk and baby food in several European countries, the US, Australia, and Norway.

By 1914, Van den Bergh and Jurgens, two Dutch margarine companies, had seven factories in Germany each and expanded their business by investing in distribution and acquiring retail shop chains in Britain.

Lever Brothers, a British soap company, built or acquired soap factories in different countries between 1890 and 1914. They expanded their operations by establishing multiple factories in many countries.

European businesses which remained neutral during WWI, like Swedish, Swiss, and Dutch companies, gained a significant advantage. They could acquire or purchase factories and companies from the countries involved in the war, leading to a further expansion.

The expansion of multinational companies during the interwar period was impacted by exchange controls, tariffs, and the need to negotiate with governments. This period brought challenges such as a rise in failures and divestments.

During the interwar years, companies expanded and made more products in foreign countries, but the strategies became much more complex due to the changing global landscape and its challenges.

The Swedish ball-bearing industry was completely acquired by a Swedish company in the 1920s, leveraging the profits from the war.

The period following World War I saw a dramatic change in the global business landscape, with the winners gaining significant advantages and expanding their operations further.

A practice where businesses in different countries agree to set fixed export prices for their products in specific markets, often seen in industries like steel.

Agreements made between companies in different countries to limit the quantity of goods they produce or sell, often with quotas based on percentages of total sales.

A common practice in international cartels where a company's home market is reserved exclusively or partially for its own domestic businesses, limiting foreign competition.

In some international cartels, foreign businesses are allowed to supply specific markets, but their share is strictly limited to a set percentage of the local demand.

International cartels often divide sales territories among their members, allocating specific geographic regions to each participating company.

A common practice in international cartels where companies share patents and technology, often involving agreements for sharing research and development results.

To prevent cheating and ensure compliance, many international cartels have rules and sanctions for members who violate the agreement, including fines for exceeding quotas.

International cartels often establish administrative structures with representatives from member companies who meet regularly to make decisions and oversee the implementation of the cartel's agreements.

A shift in the chemical industry from using coal to petroleum as the primary raw material for organic chemical production.

Large companies from the US and Europe invested heavily in building chemical plants in other countries, especially in Europe, during the 1950s.

Du Pont's foreign expansion was part of a broader trend for US chemical companies to invest globally after the mid-1950s.

After World War II, German chemical companies like BASF, Bayer, and Hoechst regained independence and focused on international production, notably in Latin America and Western Europe.

The Swiss chemical companies Ciba, Geigy, and Sandoz ditched their cartel in 1950 and engaged in significant foreign direct investment.

The increasing demand for cars worldwide, combined with trade barriers and ‘local content requirements’ in many countries, led to a surge in foreign direct investment in the automobile industry.

Chrysler, the third largest US car manufacturer, entered the global market by acquiring foreign companies after World War II, competing directly with Ford and GM.

Competition between major US car companies in the US market extended onto the global stage.

A system focusing on efficiency, quality, and eliminating waste, often used in manufacturing. Key features include just-in-time production and close supplier relationships.

A post-war period of rapid change in the car industry. Japanese manufacturers, like Toyota and Nissan, surpassed major Western companies by focusing on innovation and efficiency.

A strategy where components are sourced from external companies rather than being produced internally. This can reduce costs and allow for specialization.

This refers to the process where companies from different countries merge or consolidate to create larger, more competitive organizations. This was particularly common in the Western European car industry.

The focus on exporting products to other countries before establishing direct manufacturing facilities in those locations. This was common for European car makers before the 1970s.

This refers to the way companies can be replaced by new entrants if they don't adapt and innovate. The example of Japanese car makers overcoming American giants shows this.

The shift from large-scale, centralized production to more flexible, efficient systems. Toyota's production system exemplifies this change.

A production method focusing on minimizing waste and maximizing efficiency. Key principles include ‘just-in-time’ production and close supplier relationships.