The strategic role of foreign sites usually evolves over time. Initially, most of the time, the strategic role of foreign production sites is to produce labor –intensive products at a low cost as possible.
Then, over time, the strategic role of these factories expanded. The production sites will then become an important place for design and assembly of the products for the global market place.
For example, HP’s operation in Singapore was established at a low location to produce circuit boards. But, this facility then became the center for the design and final assembly of portable inkjet printers for the global marketplace. This type of upward migration in strategic roles of foreign production sites arise due to many foreign sites upgrading their own capabilities.
Such upgrades mainly arise from two sources.
- Pressure from the head office to improve a site’s cost structure & to customize a product to the demands of consumers
- Capabilities of a foreign site: Advanced infrastructure
As a result of the above, most foreign production sites are now not only low cost production facilities, but also globally dispersed centers of excellence. This also implies that once a foreign factory has been established and valuable skills have been accumulated, it is not wise to switch production to another location just because the costs increased or for such simple reasons.
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