vviewpoints
DOI: 10.1145/1965724.1965734
technology strategy
and management
Driving power in
Global supply Chains
How global and local influences affect product manufacturers.
IllustraIon By anDrIJ Borys assocIates
SuppLy ChAins Are increas- ingly global. Consequent- ly, we pour energy into managing existing global supply chains efficiently,
with their risks (for example, risks
arising from geographic dispersion)
and rewards (such as the benefits derived from cost arbitrage). Yet we do
not know enough about how profits
are divided and distributed along a
global supply chain that changes over
time. This is a question worth posing
at a time when new locations have
become available not only for production but also for consumption, especially in rapidly growing emerging
markets. For example, if the end market for electronic goods shifts from
the U.S. to China or India, would the
supply chain become driven by global
or local corporate entities?
Any supplier to a famous brand,
be it Apple or Nike, knows all too
well that the corporate client does
not need ownership to exert power
over the supplier. In this world of cor-
uct manufacturer to a component
manufacturer? What strategies are
available to the final product manu-
facturer to circumvent this migration
of power in global supply chains?
porate control without ownership,
what opportunities exist for creating
and capturing profit in global supply
chains? By comparing the evolution
of major players across different industries and service sectors, this column addresses the question: under
what circumstances do value-adding
activities migrate from the final prod-
What We Already Know
Many readers of this column are likely
familiar with the fate of IBM. In its
initial era of dominance, IBM was a
classic vertically integrated company.
But faced with competition in the personal computer market, IBM decided
it could not keep up on all fronts and
outsourced its operating system to Microsoft and its microprocessors to Intel
in the 1980s. This was the beginning of
the end of IBM as a computer hardware
company. With IBM’s outsourcing decisions, new players came to occupy horizontal industry segments—Microsoft
in operating systems and applications
software, Intel in microprocessors, and
Compaq and HP in IBM-compatible final assembly. Technological advances
in subsystems made it more profitable
to make microprocessors and software
