Discuss the factors that contribute to a decision where to establish a manufacturing facility: Higher Diploma in Business in Supply Chain Management Case Study, ITC, Ireland

With reference to the case study and paper provided, discuss the factors that contribute to a decision where to establish a manufacturing facility.

BMW, Spartanburg, South Carolina: Drivers and Processes in the International Plant Location Decision

Abstract

By the early 1990s, BMW confronted strong “push” and “pull” factors that demanded it abandons its Pure Global Strategy based in Germany and establishes its first international ñiU manufacturing facility. In particular, it was necessary to establish this plant in the United States, it’s largest market where sales had been declining. This paper examines the international plant location decision of BMW.

Introduction

Studies from various disciplines (e.g. Economics, Industrial Geography, and International Business) offer some insight into regional inward investment and regional attractiveness (e.g. Japanese investments in Europe and China), yet their contribution to understanding corporate plant location decision-making is limited. The literature on the plant location decision is minimal.

BMW and Strategic Shift in the 1990s

The international plant location decision process involves various stages: (a) deciding whether to expand production capacity; (b) the choice of the region; (c) choice of country and finally; and (d) site selection. This paper examines in detail the motives and processes in the international plant location decision-making process of BMW.

It highlights the factors that led the company to change its choice of international business strategy and also considers other internal decisions that impacted the decision-making process. The findings of this paper provide valuable insight on the decision-making process and clear lessons for other multinational corporations (MNCs) and site selection consultants on the site selection process as well as politicians, policymakers, and economic development officials as they seek to influence this process and attract major “greenfield” investments.

The South and South Carolina in Perspective: Location Advantages and Agglomeration

The American South (hereafter referred to as the South) consists of 16 states covering the Southeastern and South-central United States. After the Civil War, the North experienced rapid industrialization and economic development. The South suffered economic retardation. In 1938 President Roosevelt described the region as “the nation’s number one economic problem” (Cobb, 1982). Post-1945, Southern states all embraced government intervention to stimulate economic development.

Each state focused upon attracting inward investment from the North due to low costs, low unionization, and an expanding market (Cobb, 1982). Between 1945 and 1970, the impoverished rural South had been liberated economically, politically, and socially (Guillory, 2010). While still mainly a rural area with high unemployment. Southern states, especially the Carolinas, had a strong manufacturing tradition. In 1978 the two largest sectors of employment were textile mill products (681,000) and apparel (599,000) (MDC, 2000). By the late 1970s, the South had a history of actively seeking inward investment albeit from the North, and numerous studies examined North-South plant location decisions (Cobb, 1982pp.209-228).