Global Supply Chain and Value Chain as a Relocation Strategy

Global Supply Chain and Value Chain as a Relocation Strategy

DOI: 10.4018/978-1-6684-7664-2.ch027
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This chapter aims to critically analyze the implications that the national protectionist policies have on the global supply and value chains and the relocation of production. The analysis is based on the assumptions that the global economy is facing the possibility of decoupling many trade connections, and this trend favors deglobalization processes that have long been promoted by populism, nationalism, and economic protectionism. It is concluded that global supply, production, and value chains, although being economically efficient, are no longer any more secure under national protectionist policies, and therefore, the relocation of production processes is mainly due to the increase in the level of income and wages of the developing countries that are the destination, and which reduce the advantages to relocate.
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This chapter discusses the relocation of the global supply chain. Due to globalization, supply chains behave globally. Materials and products have been transferred and manufacturing facilities have been allocated globally. On the other, deglobalization has occurred many times. It is almost impossible for a company to control globalization and deglobalization trend. However, companies construct supply chains and change their structure globally according to internal and external factors. The processes of economic globalization are difficult, showing a contraction in international trade flows in 2019, which are aggravated by the responses that companies have given to the health emergency. The outbreak of the coronavirus pandemic has had immediate negative effects with a considerable impact on global trade, investment, and financial flows. Coronavirus is changing the way the world does business for bad or good. Business corporations and companies are being forced to rethink their global value, production, and logistics chains, shaped to maximize efficiency and profits. Resilience, recovery, and adaptation are becoming relevant in the world economy (Javorcik, 2020).

This analysis shows expansive periods of free trade alternate with other periods in which protectionist measures and the relocation of production are part of a process that is called deglobalization and is characterized by a reduction in export growth that is compensated with increased consumption of the domestic market to defend national interests. Some developed economies have trade imbalances with negative effects on less developed countries. The current environment of economic, social, political and health instability has intensified the increase in the economic costs of transaction and coordination of the subsidiaries of multinational companies located in other international host territories, making relocation processes unviable, for which they have initiated processes of repression or de-globalization to return its production to the countries of origin. This situation has meant stagnation, and in some cases, a reversal in business strategy to deepen the globalization processes of companies (Meyer and Peng, 2016).

The level of economic integration in globalization processes is well advanced, as it has been shown that when production in some provinces of China is paralyzed, the supply of inputs to other companies from other nations has affected, a situation of vulnerability that has motivated deglobalization as a response that makes relocation more profitable with the repatriation of factories (Zhu et al., 2020). This paper first makes a critical analysis of the national protectionist policies and their implications on the global supply and value chains and how these two factors determine the strategy of the relocation of production. Finally, a discussion is offered on these issues.

Key Terms in this Chapter

Global Supply Chain: A set of activities, facilities, and means of distribution throughout the world necessary to carry out the entire sales process of a product. This is from the search for raw materials, their subsequent transformation, and their transportation and delivery to the final consumer anywhere in the world.

Production Chain: A system made up of people and companies related to each other by a succession of production operations.

Protectionism: A commercial policy established by a government that aims to protect the national industry against foreign competition with the application of tariffs or any other type of import restriction.

Value Chains: A theoretical model that graphs and allows to describe the activities of an organization to generate value for the end customer and to it.

Relocation of Production: The international displacement of a production structure.

Deglobalization: The slow-down or reverse of globalization. A political project opposed to neoliberal globalization. In the first definition, the term describes how global flows of trade, investment, and migration can decline.

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