Strengthening Competitiveness of Multinationals through Relocation of Production to Asia: An Advance Study

Abstract

This article asks whether a strategic opportunity exists for a company producing products with the label ‘Made in Germany’ to relocate production to Asia while retaining German engineering. This article focuses on the prevailing market situations of several multinational corporations based in Germany, which are encountering growing competition from Asia due to disadvantages in product price, delivery costs and transportation time that are related to a non-adapted and non-future oriented sourcing concept. Through an empirical research study, respondents from Asia were asked about their willingness to accept the price of a ‘Made in Germany’ product, the importance of price, their opinion about delivery issues, and their acceptance of local production in Asia. Total responses of N = 636 (100.0%) were collected, including n = 108 (17.0%) responses from Asia. The results are addressed to strategic management for German companies that can gain competitiveness through a relocation of production to Asia while considering long-term requirements. The results of the study suggest that the fundamental strategy of pairing German engineering with local production in Asia is worth pursuing in which the market conditions of tomorrow are considered. The results show also, that prevailing sourcing strategies of German multinationals may be wrong and therefore require an adaptation due to future market and customer realities.