Firm strategy plays an important part in determining the competitiveness of an industry in a global market. As governments embrace trade liberalization, local industries have become increasingly exposed to fierce competition from a growing array of international suppliers. Domestic producers of bulk appliances like dishwashers and refrigerators were largely insulated from foreign competition because of their size, which makes them expensive to ship across the ocean. However, low labor and production costs added to declining transportation costs have enabled many Asian appliance makers such as China’s Haier Group and South Korea’s LG Electronics to increase their U.S. market share. They are also opening plants in Mexico and neighboring countries to save on shipping.
Maytag had to adjust to the new competition through global sourcing and collaborative supply chain networks. In the case of dishwashers, its triad strategy entails sourcing the motors from suppliers in China, producing wire harnesses in Mexico, and assembling the parts in Jackson, Tennessee.
Dispensing certain activities across the transnational value chain to lower costs and gain competitive advantage is considered a successful global business strategy. This approach allows U.S. companies to share the risk with suppliers and to choose foreign companies with the best product lines or services.
Maytag selected certain suppliers (of motors for dishwashers) from China largely due to their low prices. However, it decided to make the wire harness in Mexico because they tend to be different in each model, and sudden shifts in demand require proximity to the market.
Source: Seyoum Belay (2014), Export-import theory, practices, and procedures, Routledge; 3rd edition.
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