The Role of Headquarters
New Horizons in International Business series
Edited by Ulf Andersson and Ulf Holm
Chapter 3: The Role of Headquarters in the Global Factory
Peter J. Buckley INTRODUCTION 1. The notion of the global factory was introduced in Buckley (2004) and developed in Buckley and Ghauri (2004). The key idea is that multinational enterprises (MNEs) are becoming much more like differentiated networks. They choose location and ownership policies so as to maximise profits but this does not necessarily involve internalising their activities. Indeed, they have set a trend by outsourcing or offshoring their activities. Outsourcing involves utilising ‘buy’ rather than ‘make’ in the Coasean ‘externalise or internalise’ decision (Coase 1937). Offshoring involves both the externalisation option together with the ‘make abroad’ location decision (Buckley and Casson 1976). MNEs have developed the ability to ‘fine slice’ their activities on an even more precise calculus and are increasingly able to alter location and internalisation decisions for activities which were previously locationally bound by being tied to other activities and which could only be controlled by internal management fiat. This chapter examines the role of headquarters in the global factory. Section 2 explains the meaning of the global factory and the constructs that constitute it. The crucial strategic decisions are ownership and location and these are discussed as issues in the coordination of activities in the global factory in Section 3. Section 4 discusses the power of the global factory and Section 5 analyses flexibility – a key attribute of the global factory. Strategic change over time is analysed in an example in Section 6. Section 7 examines headquarters as a spatial market-making decision taker. Section 8 concludes...
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