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Integrated Industry

Industry needs more local footholds again

Globalization is yesterday’s news – nowadays companies must follow multi-local competitive strategies to maintain enduring success, according to a study by international management consultants A.T. Kearney.

16 Nov. 2018
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(Chart: A.T. Kearney Foreign Direct Investment Confidence Index)

Economies of scale, efficiency gains and global value chains will no longer be enough in future to ensure appreciable growth, says Dr. Martin Eisenhut, A.T. Kearney’s Central European director ; a shift towards locally integrated units is needed instead. Many companies have apparently recognized this already and implemented appropriate projects. The consultants believe that those who dismiss the trend of greater regionalization as a fad are making a mistake, and that globalization will be replaced by the age of “multi-localization”. The reasons they give for this in their analysis are growing political risks, new customer needs, changing industrial policy and technical advances.

The consultancy firm advises businesses to realign global processes and value chains for their core markets, paying attention to the interactions between technological developments and local factors. They should also give greater consideration to local characteristics. Managers need to develop localized overall strategies quickly and effectively.

The trend towards deglobalization has also been reported by the “Deutsche Verkehrs-Zeitung” , the trade journal for the logistics industry. Globalization and outsourcing production to countries with low wages is apparently becoming less and less rewarding, resulting in backsourcing to original locations. It seems, however, that renewed regionalization is not easy due to the disappearance of the necessary skilled workers when production was outsourced.