In the second half of the twentieth century, it turned out that the cost of labor and production, in particular in the countries of Southeast Asia, is significantly lower than in the developed countries. Advances in information technology and communications have significantly accelerated industrial migration as part of economic globalization. Today, the production facilities of some global economic leaders are returning to their historic homeland. Thus, reshoring, the process of returning the factories that have been moved abroad, is becoming a significant trend of reindustrialization in post-industrial economies. This paper aims to compare the Canon and General Motors industries with respect to their supply chain strategies, as well as the effects of the COVID-19 pandemic on them.
Canon is a major Japanese manufacturer of opto mechanical and electronic devices for processing and printing images, medical diagnostic equipment, and a developer of information technology and television broadcasting solutions. In the year 2015, the company decided to return its manufacturing to Japan after years of chasing cheaper production outside the country (Inagaki, 2015). This reshoring strategy holds significant advantages to the business operation of the company.
The domestic market of Japan benefits immensely from the rising Canon’s domestic ratio. The one significant shortcoming that the company had to face was the high labor cost in Japan. However, it developed an effective solution to the problem, having switched completely to automized production. Thus, the high manufacturing ratios remain consistent, and the company manages to address the severe labor shortage in Japan. Indeed, machine production saves a significant amount of money on employee wages and maintains workers only for those types of jobs which cannot be performed without human help.
In contrast to Canon and some other Japanese companies such as Honda and Toyota, one of America’s biggest automotive corporations sees its potential development in maintaining and advancing its international cooperation. General Motors Company established a joint venture with SAIC Motor Corporation, a Chinese state-owned automotive manufacturing company (Staff, 2015). The joint venture between the two corporations bears the name of SAIC General Motors Inc. and has major production bases in four Chinese cities with eight vehicle and four powertrain plants operating efficiently. The agreement between General Motors and SAIC is intended to develop new energy vehicles and the next-generation powertrains (About GM China, 2014).
Moreover, it aims to strengthen the corporations’ Pan Asia Technical Automotive Center and the shared development of the vehicle architecture application. Thus, the joint venture ensures a strong strategic alliance and helps reduce costs on development strategies and production.
Such cooperation also brings about benefits for General Motors’ growth and revenue generation. The production costs in China are lower than in the United States; however, the production quality maintains high standards (Staff, 2020). It happens because the Asian manufacturing potential is driven by tough competition – thus, encouraging continuous improvement of products, reducing costs, using new developments, cheaper components, advantages of logistics, improving existing technologies, etc.
All of the aforementioned ensures the appearance of better-quality goods on the market at lower prices. However, this high production potential can as well harm General Motors as an independent American company. The concentration of modern enterprises in countries with cheap labor is gradually contributing to the formation of qualified engineering and technical personnel, increasing labor productivity and integration into global production chains. Later, these companies will have their own high-tech developments implemented in the production of competitive industrial goods which form the basis of export.
Therefore, the strategy of a joint venture may as well intervene with the company’s competitive priorities, as their less costly stakeholder may take away some of their clients. Thus, the former may become a competitor which offers lower prices, better quality, and faster and more efficient service delivery, which is not likely to happen to the companies with domestic manufacturing. It is also essential to determine which drivers of the supply chain performance affect the two discussed strategies the most to identify the two’s advantages and disadvantages (Nakano, 2020). The logistic and cross-functional drivers influence the performance of any supply chain, and the Canon’s strategy of production seems to be the most affected by facilities and information, whereas General Motors’ functioning is mostly influenced by the sourcing and transportation drivers due to its orientation towards the international market.
However, the unexpectedly serious and long-lasting COVID-19 pandemic has changed the business environment completely, as the massive lockdown significantly reinforced the supply chain shortage. The epidemic has led to complex implications for international manufacturing networks and will continue to affect businesses for a long time still (World Economic Forum, 2020). Looking at the two different strategies of Canon and General Motors, it is possible to determine the strong and weak points of each.
In particular, joint ventures have suffered great losses during the coronavirus outbreak, as they “have been unable to supply their markets due to the inability to source critical components or, in some cases, to get the increased volumes required quickly enough to meet increased demand” (Nakano, 2020, p. 4). This effect is also intensified by the fact that the shareholders may strive for more freedom and flexibility in order to maintain personal revenues and market position.
Nevertheless, General Motors, working with Chinese manufacturers, can still hope for less financial dangers, as the Chinese stock market proves to remain stable despite the COVID-19 unpleasant consequences (World Economic Forum, 2020). Speaking of companies such as Canon, which hold the majority or the whole manufacturing activity inside their native countries, these consequences may not be as dramatic.
These companies do not depend mainly on the global chain supplies and, thus, can suffer fewer revenue declines and continue their production process with fewer losses. However, companies with domestic production are still unfavorable due to the lockdown’s labor shortages and the concomitant negative outcomes for the company’s market growth. The spread of COVID-19 has disrupted the largest value chains in China, the United States, and Europe. This led to a drop in industrial production, a decrease in exports and imports, in some cases – even to a halt in production.
To conclude, the two addressed companies have different supply chain practices which unevenly influence the outcomes of their production activities. Regarding the companies’ competitive priorities, Canon might have more independence and fewer possibilities of obtaining a direct rival with better quality and lower prices, unlike General Motors. Besides, the differences in practices point to the varying importance of the supply drivers affecting the two companies. Accordingly, the chosen strategies also influence the companies’ attempts to survive amidst the coronavirus pandemic. Although Canon might have more advantages than General Motors due to its relative manufacturing independence, both companies still have to face hard times as the world’s economic state is still rather unstable.
Reference List
About GM China (2014). Web.
Inagaki, K. (2015). ‘Made in Japan” back in vogue as robots take centre stage in manufacturing’. Australian Financial Review. Web.
Nakano, M. (2020) Supply chain management: strategy and organization. Springer Singapore. Web.
Staff, R. (2015) GM confirms Indonesia factory plan with China’s SAIC Motor. Reuters. Web.
Staff, R. (2020) GM and SAIC’s China sales rebound in April as market recovers. Reuters. Web.
World Economic Forum (2020) Managing COVID-19: how the pandemic disrupts global value chains. Web.