Internationalization of the product

Internationalization of the production chain
The relocation debate is really hiding another process. Qualitatively, the past 20 years have been marked by the increased construction of cross-border production chains in many industrial sectors. By and large, three different basic types have emerged (table1). The first is the reduction of processing depth through outsourcing to other enterprises. So the production chain becomes more fragmented and individual process steps are increasingly handled by subcontractors both at home and abroad. The second is offshoring, under which further production capacity is built up abroad with the aim of reducing costs. In particular, it can often be seen that many new European Union countries are being linked into international production chain as component suppliers. Alongside these two vertical divisions, a third phenomenon has been the increasing development of parallel production. For example, in parts of the automobile industry, the same model may be built at different sites. This means that the plants are in direct competition with each other. Apart from market access, the motives for international production networks have mainly to do with lowering production costs. The outcome has been that multinational enterprises have gained the upper hand over work-forces and unions. The example of company-internal beauty contests to see who will be awarded the manufacture of a car model shows just how workforces are now at increased risk of being pitted against each other. These contests can be, held over and over again, both between Munich and Hamburg and at the international level. Rather than just accepting a broad-brush picture of dying production sites, it may be helpful to take a look at individual sectors and also at the economy as a whole. Briefly, the situation is as follows. In the garment and domestic appliance industries, employment in Germany has clearly declined in recent years. This production increasingly takes place in Eastern Europe and to some extent in East Asia. However, this finding cannot be generalized. For instance, automobile production, which dominates the German industrial scene, has seen an increase both in added value at home and in German firm’s engagement abroad.
The position in the metalworking industry as a whole is similar. It accounts for more than 55 per cent of Germany’s exports. Due to internationalization, preparatory work is indeed increasingly being performed abroad, but Germany has lost none of its importance as a production site. In future, its economic structure will continue to develop via major leading sectors such as automobile production and mechanical engineering.