Global Business Management: Global Factory Analysis and Impact

This essay delves into the concept of the global factory, a model where operations are not confined to a single country but are dispersed globally to optimize resources and meet international market demands. The essay examines the positive implications, such as identifying market preferences and regulating costs through strategic facility placement and sourcing. It also addresses the negative implications, including challenges in adhering to diverse international regulations and the difficulty in meeting varying regional product requirements. The author suggests leveraging the global factory model by establishing manufacturing facilities in developing countries like India and China to capitalize on lower labor costs and favorable business infrastructure, while also considering strategies for lean production and management to enhance organizational effectiveness. References from Buckley, Dahlgaard, and others are included.

Running head: GLOBAL BUSINESS MANAGEMENT
Global business management
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Introduction
The concept of the Global factory was first penned by Peter Buckley. According to him, the
concept of the global factory originated due to the initiation of the globalization in the recent
time. The concept of the global factory is same as any other organization or company but their
operations are not limited to the national boundaries of their home country (Buckley 2011). On
the other hand, global factory operates as the global entity with considering the demand and
requirement of the global market. In accordance to this, the operational facilities of the global
factory divided into different parts and are scattered in different locations around the world.
According to the Peter Buckley, the majority of the operations of the global factory are
being done by the third party vendors without having own facilities. For instance, research and
development and distribution and sales are being outsourced to the contractors and they are
located in different countries around the world based on the resources available in those
countries (Buckley 2011). Thus, global factories source their raw materials from different areas
around the world in minimal cost available and market their products on a global basis.
Implications of global factory on international business
The global factory is having both positive and negative implications for the international
business. The following sections will discuss those.
 One of the key positive implications of the global factory is a determination of the taste
and preference pattern of different markets around the world. This is due to the reason
that, as discussed earlier, the global factory is having their operational facilities scattered
around the world (Buckley and Strange 2015). They are able to identify the needs and
requirement of the different markets around the world. Thus, the process of international

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business becomes more effective with the efficient determination and identification of the
need from different parts around the world and offering products in accordance to that.
 Another positive implication of global factory is regulation of the cost of the international
business. As discussed earlier, the global factory is having their facilities around the
world. Moreover, the facilities are being built based on the resources available in the
particular country. For instance, countries with having the more advanced technology and
access to latest technological infrastructure are being chosen for the research and
development and the countries with having a lower cost of human resources are being
chosen for manufacturing facilities (Eriksson, Nummela and Saarenketo 2014). Thus, this
helps in regulating the cost of the international business. Moreover, due to the sourcing of
the materials at minimal cost, it is more helpful for the global factory to offer products at
more affordable cost.
 Apart from the positive implications, there are few negative implications also of the
global factory. One of the key negative implications is the difficulty in adhering to the
difference in the regulations and legislation in different countries. In the current global
scenario, countries are having different political system along with having the different
and diverse set of regulations and legislation for the business organizations to follow
(Dahlgaard et al. 2013). Moreover, international diplomatic relations between the
countries are fluctuating in nature. Thus, it is difficult and challenging for the global
factory to comply with all these differences. They are having their facilities in different
countries and thus, they have to face the diversity of regulations and fluctuation political
factors.

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 The concept of the global factory is to market global products in different regions around
the world. However, the need and requirement in different countries are different and
diverse. Thus, in some cases, it becomes difficult to meet the requirements of all the
marks with the universal products (Stahl and Tung 2015). In that case, the international
business faces the difficulty of not having the expected market potentiality for the
particular product.
Leveraging the concept of global factory in developing international business
 One of the key steps will be to have the manufacturing facilities in the developing
countries such as India and China. This is due to the reason that, these developing
countries are having more growth rate compared to the developed countries (Farooki and
Kaplinsky 2013). Moreover, India and China are having the lowest cost of human
resources along with favorable business infrastructure. Thus, the costs of production will
be lower.
 Facilities will be less scattered in order to face fewer difficulties in adhering to different
regulations. This will also help in reducing the cost involved in managing the facilities in
more countries along with having more effective management. Thus, lean production and
management will be initiated in the organization, which will further enhance the
effectiveness of the organization.

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Reference
Buckley, P.J. and Strange, R., 2015. The governance of the global factory: Location and control
of world economic activity. The Academy of Management Perspectives, 29(2), pp.237-249.
Buckley, P.J., 2011. International integration and coordination in the global factory.
Management International Review, 51(2), p.269.
Dahlgaard, J.J., Chen, C.K., Jang, J.Y., Banegas, L.A. and Dahlgaard-Park, S.M., 2013. Business
excellence models: Limitations, reflections and further development. Total Quality Management
& Business Excellence, 24(5-6), pp.519-538.
Eriksson, T., Nummela, N. and Saarenketo, S., 2014. Dynamic capability in a small global
factory. International business review, 23(1), pp.169-180.
Farooki, M. and Kaplinsky, R., 2013. The impact of China on global commodity prices: The
global reshaping of the resource sector (Vol. 57). Routledge.
Stahl, G.K. and Tung, R.L., 2015. Towards a more balanced treatment of culture in international
business studies: The need for positive cross-cultural scholarship. Journal of International
Business Studies, 46(4), pp.391-414.