I i Division of Research School of Business Administration December 1992 GLOBAL MANUFACTURING NETWORKS SURVEY A Preliminary Assessment of Strategic, Operational and Organizational Practices Working Paper #700 Aneel Karnani and Brian Talbot, et al. The University of Michigan This research report is co-authored by the Co-Directors and Research Associates of the Global Manufacturing Network Project. Global Manufacturing Network Project Co-Directors: Professors Aneel Kamani and Brian Talbot, School of Business Administration, University of Michigan. Research Associates: Mr. Clayton Hubner, Mr. Anil Khurana, Ms. Joan Penner-Hahn, Prof. Venkatram Ramaswamy, Mr. Vivek Sankaran, Ms. Chris Siegel, Ms. Ryoko Toyama, Mr. Masaaki Yasukawa. FOR DISCUSSION PURPOSES ONLY This material may not be quoted or reproduced without the expressed permission of the Division of Research. COPYRIGHT 1992 The University of Michigan, School of Business Administration, Ann Arbor, Michigan.

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GLOBAL MANUFACTURING NETWORKS University of Michigan Introduction This document contains a summary analysis of the responses to the Global Manufacturing Networks Survey conducted by the University of Michigan Business School in 1991. The survey is part of a larger effort to study the issues and challenges facing firms in managing global manufacturing networks. The questionnaire used for this survey was designed to learn more about these issues. Five different areas were covered: Plant location decisions, Material Flows, Technology transfer, Organizational Systems and Performance. All questions, except those on material flows and organizational systems, were in the form of a 5 point Likert scale. Material flows were expressed in percentages and responses to questions on organizational systems identified the locus of manufacturing decision-making. The following pages contain the summary analysis of the responses to some of the main questions in the survey. Respondents & Sample Size The respondents were plant managers in international firms throughout the United States, Europe and Japan. Several key manufacturing industries were covered in the survey. The appendix contains a list of industries and countries covered by the survey. 159 responses were used for this summary analysis. Only responses from plant managers were used for this analysis. Out of the 159 responses 72 responses were from plants built outside the home country. In this sample, 35 plants were owned by European firms, 41 plants by Japanese firms and the rest were US firms. Analysis Methodology This document contains the means of the responses to the main questions in each section. The means are presented graphically in the following pages in three forms -- a) the aggregate data, b) comparison of plants located in the home country with those outside the home country, and c) comparison of plants owned by US, European, or Japanese multinationals. A factor analysis was performed on the responses to group the variables into meaningful factors. The factors, and the variables that comprise these factors are also listed. The grouping of variables into factors suggests relationships between the variables when studied in the context of the questions. The relationships have not been explored further in this analysis. The intention of this analysis is to provide a summary of the preliminary findings from the questionnaire. A lot of insight is yet to be gained from the rich data set. A more rigorous analysis of the responses is currently in progress.

SECTION II - PLANT LOCATION DECISION Q1. To what degree did the following factors influence your plant's location decision? The response to each factor was on a scale from 0: no influence to 5: very large degree The factor analysis procedure grouped the variables into seven different sets: 1. Financing & Trade Access to Protected Markets Regional Trade Barriers Government Subsidies Tax Conditions 2. Factor Availability Proximity to Suppliers Access to Raw Materials Access to Low Cost Labor Access to Energy 3. Community Compatibility Language/Culture/Politics Availability of Advanced Infrastructure Exchange Rate Risk 4. Market Base Location Proximity to Customer Proximity to Market 5. Regulatory Environment Environmental Regulations Labor Practices & Regulations 6. Technology Access Access to Local Technology Proximity to other facilities of the Business Unit Access to Capital 7. Labor Requirement Access to skilled labor The Proximity to the Customer and the Proximity to the Market (which group into the factor Market Base Location) have a strong influence on the plant location decision. Other variables that have a strong influence are the Availabilitv of Infrastructure and Access to Skilled Labor. When plants are located in the home country, the data indicates that the Proximity to the Customer and the Market are less important than the Availability of Infrastructure and the Access to Skilled Labor. The reverse is true for plants located outside the home country. Also, not surprisingly, trade issues like Regional Trade Barriers, Exchange Rate Risks, Access to Protected Markets and Government Subsidies, and the Language/Culture/Politics of the region have a larger influence on the location decision for plants away from home.

Proximity to Supplier, Access to Raw Materials, and Access to Low Cost Labor (three of the variables in Factor Availability, factor 2) influenced the location decision of Japanese owned plants more than the US and European owned plants. The influence of the regulatory environment was less for Japanese'owned plants than for European and the US owned plants. The means of the observations for the different variables are depicted graphically on the next three pages. Note that the graphs do not group the variables into the factors listed above.

Factors influencing the plant location decision when the plant was built. Combined Data Proximity to Market Proximity to Customer Availability of Advanced Infrastructure Access to Skilled Labor Access to Energy Access to Low Cost Labor Proximity to Suppliers Labor Practices & Regulations Access to Raw Materials Proximity to other facilities of the Business Unit Tax Conditions L...guage/Cu ture/Politics Environmental Regulations Access to Local Technology Access To Capital Government Subsidies Access to protected markets Regional Trade Barriers Exchange Rate Risk fEl 2.43 2.41 -3~~~~ _ ~2.39 a_ - ~M id 2.38 -__ 2 2 8 ~2.28 2.18 2.06 -1 $3 1.67 1.6 1.43 _1.38.5.15 1 1.07 0A1.92,. I _, _ 11 3.33 I 3.03 M12.97 M2.96 0 1 2 3 4 Level of Influence(Means) --->

Factors influencing the plant location decision when the plant was built (contd.). Plant built outside Home Country Proximity to Market Proximity to Cu fomer Availability of Advanced Infrastructure Access to Skilled Labor Access to Energy Access to Low Cost Labor Proximity to Suppliers Labor Practices & Regulations Access to Raw Materials Proximity to other facilities of the Business Unit Tax Conditions Language/Cu lture/Politics Environmental Regulations Access to Local Technology Access To Capital Government Subsidies Access to protected markets Regional Trade Barriers Exchange Rate Risk 1 8~a~pn I.' s 1 - - | | | S1S E E 3.,, i 3.02 2.83 2.32 1 - 2.6:1 ~~~~~2.26 - _ 2 2.23 _...2.16 1.89 _ 2.22 ~ i.44 -1 I II I I II II I I 85 Plant built in Home Country -..... r "; 2(.83 _ — ~~ _ 2.64........ 2.93 3.08 l -_ ' " ' ~~~2.55 _ w2.23 ] 2.5 '...2.54 2.41 '..... 2.46, _ 1~ ~~ 1.92 1.3 '_ 1:.84 _| ~1,81 1.41, ] il 0.93 0.9 | I il 0.-76 1 f I 0.44' I I,.,.. ~~~~f~~~~~H~~~~~ i~~~~~~ft~~~~~~~ i~~~~~ I, 1.5 _ _~~iiit~~B 1.38; 1'.85 __31E 1.41, _.tl_~m-m_ 1.39 ' I 14 EMEEME 1.41 I I 2.38 - I I I I I I I I I I I I I I I I I I I I i I I I I I I I I I I 0 1 2 3 4 Level of Influence(Means) ---> 5 0 1 2 3 4 Level of Influence(Means) ---> 5

__ Factors influencing the plant location decision when the plant was built - By Region of Ownership Proximity to Market Proximity to Customer Availability of Advanced Infrastructure Access to Skilled Labor Access to Energy Access to Low Cost Labor Proximity to Suppliers Labor Practices & Regulations Access to Raw Materials Proximity to other facilities of the Business Unit Tax Conditions Language/Culture/Politics Environmental Regulations Access to Local Technology Access To Capital Government Subsidies Access to protected markets Regional Trade Barriers Exchange Rate Risk U.S.A. 33.23 2'83 3.03 3.32 2.5~ i i 2.26 "2.33 2.46! i "- _ ~'" 2.21 '___/~I~~2.09 _ _~~~~ 2.21 I i 1.57' __~~~1.69 i~s. ~..1.36!~~~~~~~~~~ 1.24 P.96 i, 4 00.94 EUROPE 3.23 s -: -......3..302 3.17 - i _ ~ EID2.94 00 ~~~~~~~1.7' 1.97 2.08 2 -~~~~~~2.94 _i! 1.56'.__|_2.03 _ 1.32 _ _1.53' _.I I 1j.06 1.35 I, _ _1.53 0.79 0,. 0.73 JAPAN, i i 3.5 I!, 3.29 2.95.. 2.58' _ ~ ~ ~~~~~~~~~~I I 2.49, i, i 3.17 2.78 1,85 2.68!, i -2.61,' 8 5.12.27 I. 2 2.07 '; '~'~1.37 i 1.4 _ 11~.61,, 1.22' - ~ 1.34.,., I _ 1.3 72 I I L~13 0 1 2 3 Level of Influence(Means) ---> 4 0 1 2 3 Level of Influence(Means) ---> 4 0 1 2 3 Level of Influence(Means) ---> 4

SECTION II - PLANT LOCATION DECISION Q2. Since your plant was built, conditions may have changed. Please indicate how the following factors would today influence the plant location decision? The response to each factor was on a scale from 0: no influence to 5: Very large degree This question asks the respondent to evaluate the influence of the variables in Question 1 in today's business conditions as opposed to when the plant was built. The factor analysis on the responses resulted in a grouping of variables slightly different from Question 1, suggesting that the relationships between variables may be different for the decision process today. 1. Financing & Trade Access to Protected Markets Regional Trade Barriers Exchange Rates Access to Local Technology Access to Capital 2. Factor Availability Proximity to Suppliers Access to Raw Materials Environmental Regulations (possibly meaning access to waste disposal facilities) Access to Energy Access to Skilled Labor 3. Community Compatibility Language/Culture/Politics Availability of Advanced Infrastructure Labor practices/regulations 4. Market Base Location Proximity to Customer Proximity to Market 5. Government Incentives Tax Conditions Government Subsidies 6. Labor Requirements Access to Low Cost Labor 7. Proximity to other facilities of the Business Unit In the factor analysis, while four out of seven factors were almost identical to the factors in Question 1, Tax Conditions and Government Subsidies grouped to form a factor we have termed Government Incentives. Also, while Access to Skilled Labor was a separate factor in the previous case. Access to Low Cost Labor separated as a factor for this question (note that access to skilled labor is still a bigger influence on the location decision). The Proximity to the Customer and the ke, and the Availability of Infrastructure are still the dominant influences in the plant location decision.

The variables related to trade issues such as Regional Trade Barriers and Exchange Rate Risk, and variables indicative of access to the market and customer recorded higher means for the location decision for plants built outside the home country. While Access to Skilled Labor was considered more important to US and European owned plants, the Japanese plants placed an emphasis on low cost labor. Labor Practices & Regulations also seem to have a larger influence on the location decision of US owned plants. European owned plants considered the Access to other facilities of the Business Unit more important in today's location decision than US or Japanese owned plants.

Factors influencing the plant location decision if the plant were built today. Proximity to Market Availability of Advanced Infrastructure Access to Skilled Labor Proximity to Customer Labor Practices & Regulations Environmental Regulations Access to Low Cost Labor Proximity to Suppliers Tax Conditions Access to Energy Access to Raw Materials Proximity to other facilities of the Business Unit Language/Cu ture/Politics Access to Local Technology Government Subsidies Exchange Rate Risk Access To Capital Regional Trade Barriers Access to protected markets Combined Data 3.48 3.42 3.33 _NUMM3.27 3.12 2.94 2.91 2.79 2.74 2.7, 2.61 2.39 2.34 2.08 1.6..2.02 1.8! 1.66 _-:-'....1.6 -... ' 1.43 I _ I _ ___ _iII....._.... 0 1 2 3 4 Level of Influence(Means) --->

Factors influencing the plant location decision if the plant were built today (contd.). Plant built outside Home Country Proximity to Mar Availability of Advanced Infrastruct Access to Skilled LU Proximity to Custor Labor Practices & Regulati Environmental Regulatic Access to Low Cost La Proximity to Suppli Tax Conditi Access to Ene Access to Raw Mate Proximity to other facilities of the Business I Language/Culture/Polil Access to Local Techno Government Subsic Exchange Rate F Access To Cap Regional Trade Barr Access to protected mar I I _-....... 3..6 I-_w — I ~ -3.44' ii I i I abor i ~~~~~~stp~~~~~~~~~~~~~~~~~~~ax~~~~~~~~~~~~~~~a~~~~~~~~~~es~~~~~~~~~~~~~~~ap~~~~~~~~~~~~~~ II I I I I I 2.57 1 i I~~~~~~~~........ ' '"....i~ 2 I ~~il$8~i~l.,- ' - 2. l i _1~IB~BiB~t'"'-~,~"~. 2. - 1!1 -~2. 17 2!!m/B/SiI2.02 _ ~l_2.1 1 - ~~~~~~~~~~~~~~~~~~~I _Bl_!l~. 12. 1 _1|1t~1,i.82 ~lif~lf~t~Ifiti~ 1.:7s _ 1.47', I..5. 17.441 1I 2.55 I I II II II I 13.16 r m3.39: 3 I I I I I 7 I. I I II I I I I II II I I 0 Plant built in Home Country 3.3 3.39 3.49 3.15 -_M~. MOSLEM3.25, i, 3.19 2.92 3 2 E. i,, |l|||1 2.99 2.93,,! 2'.79 2.61 1 __@_ ~ 2.14 ~~~~~~2.!4 i~:~l1.94 L1.53 1. 1.51: 1.4_ 4,, _N 1.39 ',, I ~ I i i.. I I I I I I I 0 1 2 3 4 Level of Influence(Means) ---> 5 0 1 2 3 4 Level of Influence(Means) ---> 5

Factors influencing the plant location decision if the plant were built today - By Region of Ownership Proximity to Market Availability of Advanced Infrastructure Access to Skilled Labor Proximity to Customer Labor Practices & Regulations Environmental Regulations Access to Low Cost Labor Proximity to Suppliers Tax Conditions Access to Energy Access to Raw Materials Proximity to other facilities of the Business Unit Language/Culture/Politics Access to Local Technology Government Subsidies Exchange Rate Risk Access To Capital Regional Trade Barriers Access to protected markets U.S.A.,,,............. 13.46 -, _ _ L_....._ 3.46 3.6 i.i... 3.32 _ 3.59 i l l2.98 2.98,''_...,2.98 2.89 ~~,,, 3.19 21.86 2.56' 2.27 D E S-I | _.13 /JjjS| _J~2.07 l ll~2.33 1.33 _~~~1.43 _ __~1.76 0 1 2 I3 u Level of Influence(Means) ---> EUROPE ii,i.............. 3.44 -Emu=, _ ~ 3.24 3.47 3.09,, '.......2.7 4 l ' ' _ _~~2.74 " ~~_ | =_ 2.41 _ E = _~~~2.32 -_.. 2.5 -'_~ ~ _~~2.56, -_ ~ ~~~2.32......:.91 2.26 2:_~~2 _ ~ ~~ 2.21 //11_ /I~j 1.58: -_ _~ 1.47 ' 1.58 I _ _,.s:,e m.. I,_l, JAPAN 0 1 2 3 Level of Influence(Means) ---> 4 0 1 2 3 Level of lnfluence(Means) ---> 4

Difference in the Influence of a Factor on the Location Decision Today vs. When The Plant was Built. Combined Data Environmenta Exchanc Labor Practices & Ta Governml Regional T Language/CL Access to Locc Access to Lo% Availability of Advanced Proximity Access to Access to R; Access to prote Acce Proximity Acce Proximity to other facilities of the E Proxin I Regulations 1.27 ge Rate Risk 0.8 Regulations ~ 0:: ---'"~'"' — 0 74 ix Conditions 0.66: ent Subsidies - 0.63 rade Barriers 0.53 lture/Politics _ 0.51 il Technology 0.48 w Cost Labor 0.5' Infrastructure 11 0.45 to Suppliers 0.4 Skilled Labor 0.37 aw Materials 0.33 cted markets 0.28.ss to Energy 0.27: to Customer 0.24 ss To Capital ~ 0.23: 3usiness Unit 0 0.21 nity to Market 0'.15.t... I.... i _ I _.. I 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 Level of Influence(Means) --->

SECTION III- MATERIAL FLOWS Q1. Which of the following best describes the material flows among the plants in your business unit? Aggregate Data 356% 30% 25% 20% 15% 10% 5% 0% 1: From Central Plant to Satellite Plants 2: From Satellite Plant to Central Plants 3: Between sister plants making similar products 4. From Upstream to Downstream Plants 5: All Plants are Standalone Plants with minimal material flows between them By SIC Code I ~ I ~ II-. --- — -I I I All plants are standalone plants with minimal material flows between plants From upstream to downstream plants Between sister plants making similar products From satellite plants to central plants From central plant to satellite plants Food & Kindred Products SIC 20 Paper & allied Products SIC 26 Chemicals & Allied Products SIC 28 Industrial & Commercial Machinery & Computer Equipment SIC 35 Electronic & Electrical Equipment & Components except Computer Equipment SIC 36 Transportation Equipment SIC 37 Meas., Analyzing & Controlling Instr.;Photographic Medical & Optical goods; Watches & Clocks SIC 38 Miscellaneous Manufacturing Industries SIC 39 I4.;4, 1 I 0 F I I( I sample too small sample too small 11.00% 4.00% 17.00% 11.00% 3.00% 8.00% 16.00% 27.00% 13.00% 52.00% 17.00% 24.00% 0.00% 31.00% 12.00% 33.00% 13.00% 20.00% 42.00% 24.00% 17.00% 24.00% 50.00% 20.00% 10.00% sample too small

Q3, Q5. Indicate the current sources of material inputs/outputs to/from your plant. The sources and destinations were company owned plants, customers'and suppliers, both within the country and outside the country. The following percentages are calculated from the data: Export-lmport: TO[ Company owned plants and customers outside the country] - FROM[Company owned plants and suppliers outside the country] Material Inflow: Inflow FROM Company owned plants Material Outflow: Outflow TO Company owned plants Export- Material Material Import Inflow Outflow Food & Kindred Products SIC 20 sample too small Paper & allied Products SIC 26 -20% 94% 86% Chemicals & Allied Products SIC 28 3% 73% 70% Industrial & Commercial Machinery & Computer Equipment SIC 35 -20% 67% 71% Electronic & Electrical Equipment & Components except Computer Equipment SIC 36 1% 69%/ 73% Transportation Equipment SIC 37 5% 67% 60% Meas., Analyzing & Controlling Instr.;Photographic Medical & Optical goods; Watches & Clocks SIC 38 -2% 55% 78% Miscellaneous Manufacturing Industries SIC 39 sample too small Q4, Q6, Indicate how the current sources of material inputs/outputs to/from your plant are changing. Percentage of responses indicating an... Increase Decrease No Change From Company Owned Plants in your country 25% 30% 45% To Company Owned Plants in your country 41% 24% 35% From Company Owned Plants Outside your country 36% 34% 40% To Company Owned Plants Outside your country 25% 48% 27% From External Suppliers Inside your country 37% 37% 26% To External Customers Inside your country 35% 30% 35% From External Suppliers Outside your country 32% 47% 21% To external Customers Outside your country 14% 62% 24% I

SECTION IV - TECHNOLOGY TRANSFER Q1. Please indicate to what extent each of the following possible sources of technology play a role in your business unit. The response to each factor was on a scale from 0: no role to 5: very large extent PRODUCT TECHNOLOGY The factor analysis produced five separate factors. 1. Hired External Consultants Consulting Organizations Research & Educational Institutions Government 2. External Sources (difficult to access) Competitors Customers 3. Internal Sources Plant level R&D, manufacturing, engineering,... Work Force 4. Suppliers 5. Corporate Sources Business Unit level R&D, manufacturing, engineering. The main sources of technology were identified as Business Unit R&D. manufacturing, engineering facilities followed by the same resources at the plant level. Workforce, Customers and Suppliers were also considered to be important sources of product technology. For plants located at home, Customers also served as a prominent source of product technology. Little difference exists between the regions with the exception that US and Japanese plants rate the Suppliers as a source of technology higher than the European plants. PROCESS TECHNOLOGY Though the factor analysis produced a set of factors identical to those for Product Technology, four variables: - Plant Level R&D, manufacturing, engineering... - Work Force - Business Unit Level R&D, manufacturing, engineering... - Process Equipment Suppliers were very dominant sources of process technology. Again, there was very little difference in the means of these variables when compared based on location at home or outside, and when compared by Japanese, US or European ownership.

Main Sources of Product Technology Combined Data Competitors 2.35 Research & Educational Institutions 1.79 Consulting Organizations -fiMIlH liB 1.47 Government B 1.,27 0 2 3 4 5 Level of Influence(Means) ---> Plant built Outside Home Country Plant Built in Home Country Business Unit level R&D, Mfg., Engr. A 4.07 4.25 Plant Level R&D, Manufacturing, engineering.....35 3.6 l Work Force 2_1_284 E |. 0l3.07 Customers lo |1 2.6, I | 3.03 Suppliers 2.54....... 2.83 Competitors - 2.31 ' " | — 2.39 Research & Educational Institutions 1. 2 Consulting Organizations 1.21, Government 11.2,1.34 0 1 2 3 4 50 2 3 4 5 Level of lnfluence(Means)- Level of lnfluence(Means) --->

Main sources of Product Technology - By Region of Ownership U.S.A. EUROPE JAPAN Business Unit level R&D, Mfg., Engr. Plant Level R&D, Manufacturing, engineering... Work Force Customers Suppliers Competitors Research & Educational Institutions Consulting Organizations Government 0 1 2 3 4 5 0 1 2 3 4 5 0 1 2 3 4 5 Level o luence(Means) ---> Level of Influence(Means) --->Level of Influence(Means) —> Level of Influence(Means) --->

L| _ _ Main Sources of Process Technology Combined Data Plant Level R&D, Manufacturing, engineering... -. 396 Business Unit level R&D, Mfg., Engr.. 91 Work Force 3.28 Process Equipment Suppliers - 3.06 Suppliers -- 2.66; Competitors i s -2.1 2.12 Customers 2. 02 Research & Educational Institutions _ _i_" 1.6 Consulting Organizations I t1.51 Government 1.18 0 1 2 3 4 5 Level of Influence(Means) ---> Plant built Outside Home Country Plant Built in Home Country Plant Level R&D, Manufacturing, engineering... 1. 3,83 4.08 Business Unit level R&D, Mfg., Engr. _ '.94 OA 3.89 Work Force..... 3. 3.06. 3.49 Process Equipment Suppliers..... 3 I | O 3.12 Suppliers _2.62'_ 1,2.7 Competitors 0 2.04 2.2 Customers n- _ 2.01 Research & Educational Institutions 1.59. 1.62 Consulting Organizations l 1.26 ' | 1.77 Government _ 1.19,, 1.17 0 1 2 3 4 50 1 2 3 4 5 Level of Influence(Means) ---> Level of Influence(Means) --->

Main sources of ProcessTechnology - By Region of Ownership Plant Level R&D, Manufacturing, engineering... Business Unit level R&D, Mfg., Engr. Work Force Process EquipmentSuppliers Suppliers Competitors Customers Research & Educational Institutions Consulting Organizations Government U.S.A. '3.96 4.05 I _ I. 3.27 i S l i 1 DN I 1 | 1 I I _1 i 1 i i i q 3.15 i.84 i ~ i 2.16 2.09 1.55, _ ~~ I ~ l~~~~~.15, 1.58 1.2, I.! EUROPE I,,,, I... i JAPAN [.09 3.84 -83 [_~slB 3 4.03 I i I I 3.6i I I I I 1 _.88 I,I I I I I 1 3.31 - I I I I I I I 1 2.06 Il ~ ~ ~ ~ ~ 1 I I I I I i I 3.5'9 I I I I I I 1, ~ ~ ~ ~~~~,, I I I I I, 2,77 1 l~~~~~~~~~~~~~~~ I I I I I I f f '2.94 ~~~ A i 1 I I I I 6 I I I I I I IIS~ I I 2.12 i I I I I I I I I T.82 a I I I I I 1 i 1.61,, I I i i i f I I i, 16,1 I.6, I I I I I 1.49 1.44' I il I 1 97 1 0 '. 1 1 1 1 1 I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I d.ss I I 1.411 1 0 1 2 3 4 5 0 1 2 3 4 5 0 1 2 3 4 5 Level of Influence(Means) —> Level of Influence(Means) ---> Level of Influence(Means) --->

SECTION IV - TECHNOLOGY TRANSFER Q2. To what extent are the following methods used for accomplishing technology transfer in your business unit? The response to each factor was on a scale from 0: not used to 5: used to a very large extent The factor analysis grouped the data into four groups 1. Technology Transfer Events Formal Training Project Teams & Task Force Internal Documentation Short-term reassignment of Personnel 2. Ongoing Diffusion Scientific and Engineering meetings Long-term Personnel transfers 3. Facilitating Devices External Consultants CAD/CAM Systems 4. Individual Champion Internal Documentation and the use of Project Teams & Task Forces were the two most commonly used methods for technology transfer. These two methods remain dominant when the data is divided based on plant location or by ownership. The data indicates that facilitating devices such as CAD/CAM or the use of external consultants contribute least to the transfer of technology. For the Japanese owned plants, the use of an Individual Champion to transfer technology is noticeably lower than the European and US plants and the use of Internal Documentation is higher. The most dominant factor is Technology Transfer Events (factorl) suggesting that most technology transfer is done with planned events rather than on a continuous basis.

Technology Transfer Methods Internal Documentation Project Teams and Task Force Scientific & Engineering Meetings Formal Training Long-term Personnel Transfers Short-term reassignment of Personnel Individual Champion CAD/CAM Systems External Consultants Combined Data 4.07 f.95 3.33 3.22 2'.88 2.82.....................2.78 2.42 1.52,_.I.........l.......... I...........,,.,., 0 1 2 3 Level of Usage (Means) ---> 4 5 Plant Built Outside Home Country Internal Documentation Project Teams and Task Force Scientific & Engineering Meetings Formal Training Long-term Personnel Transfers Short-term reassignment of Personnel Individual Champion CAD/CAM Systems External Consultants 4.1 -4 3.18 3.28 _ _~ ~I 2.89 2.8 2.7 _ _ 1.. 2, 1.A4, I, I, I, I Plant built in home country M_4 NW F ~~4.04 ~_ _...................-3.92 3.49 ' _........3.17 _Z~ =~~~ ~2.87 _ | Is _~~~~ 2!84 ' ___ ~.... _......Ail~lil'~tim 2,.86..s -.. 2.82 oil~ _ 1.6........ L.. J i,.. ~....~~~~I 0 1 2 3 Level of Usage (Means) ---> 4 50 1 2 3 Level of Influence(Means) ---> 4 5

Technology Transfer Methods -- By Region of Ownership U.S.A. EUROPE JAPAN Internal Documentation Project Teams and Task Force Scientific & Engineering Meetings Formal Training Short-term reassignment of Personnel Long-term Personnel Transfers Individual Champion CAD/CAM Systems External Consultants 0 1 2 3 4 5 0 1 2 3 4 5 0 1 2 3 4 5 Level of Influence(Means) ---> Level of Influence(Means) ---> Level of Influence(Means) --->

SECTION IV - TECHNOLOGY TRANSFER Q6. What is the extent of standardization across plants in your business unit? The response to each factor was on a scale from 0: no role to 5: very large extent The factor analysis grouped the variables into the following factors: 1. Control Systems(operational/tactical) Cost Accounting systems Personnel Practices & Policies Production Planning & Control Quality Control Systems 2. Procurement Standards (corporate involvement) Non computer controlled equipment specifications Computer controlled equipment specifications Facility layout 3. Customer Standards (market driven) Product specifications Process Specifications The level of standardization was highest for Control Systems, the factor which includes Cost Accounting Systems and Qualitv Systems among others. Customer Standards, i.e. Process and Product Specifications also had a high level of standardization. When compared by ownership, Personnel Practices are less standardized for European and Japanese plants than for the US plants. The data indicates that Facility Layouts are more standardized for Japanese owned plants.

Extent of Standardization in the plants. Product Specifications Quality Control Systems Cost Accounting Systems Process Specifications Production Planning & Control Computer Controlled Equipment Specs. Personnel Practices & Policies Non Computer controlled Equipment Specs. Facility Layout Combined Data..... _ ' - ' ' ' ~~~~4.18 ',_..........._~~4.05 _3:= — i.. 99....139.99...........................3.71 3.61 3.3 3.26....... |3.12 2.57 0 1 2 3 Level of Standardization(Means) ---> 4 5 Plant built outside home country Plant built in home country Product Specifica' Quality Control Sys Cost Accounting Syc Process Specificc Production Planning & Cc Computer Controlled Equipment I Personnel Practices & I Non Computer controlled Equipment ' Facility L............ '..... --..... 4.25 4.01 Mimi=7 6 3.76 33' 85 Igsaams~tg Policies't~~s~ Bissn~ ~~ns9~~8 ~ 3.5 tIfO 2.89 irir 2.65 ~i~i~I~g~~t3.19 1 ~in~i~8~s ~3.17 4.11 _ ~~~~~~~~~~~~~~4.1 _ 4.21 -~~ s... 3.58 ' _ESE= 11 _~~~~~~3.71 BO= _ g3.61' l~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 2.49, 3.41 a.. 3.06 _|~~~~~~~~~3.06 ~~Hta~~~~t~~~ p~~g~~~g ~ ---- [~"fs --- -sM L 0 1 2 3 Level of Standardization (Means) ---> 4 5 0 1 2 3 Level of Standardizaton(Means) ---> 4 5

Extent of Standardization in the Plants -- By Region of Ownership U.S.A. EUROPE JAPAN Product Specifications Quality Control Systems Cost Accounting Systems Process Specifications Production Planning & Control Personnel Practices & Policies Facility Layout Computer Controlled Equipment Specs. Non Computer controlled Equipment Specs. [.18 I.98.11 I,.. i! 1 1 i1 38 3.5i i~~~~~~~~~ I 1 1E W2.29 i~~~~~~~~~~~~~~~~~~~ 3.41 3.12 _|2.2 9.2 1 I -~ ~ _ ~,. i. | ~~~~~~3.411 _3.12'~~~.1. _ I. _ I. _...1 0 1 2 3 4 50 1 2 3 4 50 1 2 3 4 5 Level of Influence(Means) ---> Level of Influence(Means) ---> Level of Influence(Means) --->

SECTION V - ORGANIZATIONAL SYSTEMS Q6. To what extent do the following factors contribute to achieving coordination/integration of manufacturing operations across plants in your business unit? The response to each factor was on a scale from 0: doe not contribute to 5: contributes to a very large extent The factor analysis grouped the responses into the following factors. 1. Homogenization Process standardization Product standardization Technology transfer form Business Unit HQ / Central R&D Common Quality Standards across plants Technology transfer across plants in the Business iUnit 2. Duplication Similar Cost Accounting systems Similar Production Planning systems 3. Centralization Central sourcing Central production planning 4. Co-operation Joint sourcing with other plants Joint production planning with other plants 5. Personnel Interaction Interaction between plant-level and Business Unit HQ personnel Interaction between managers/engineers across plants The responses with the highest means for the aggregate data were for Process Standardization and Common Ouality Standards. Plants built outside the home country viewed Product Standardization as the largest contributor to technology transfer. Japanese plants responded with noticeably higher scores for process and product standardization, and technology transfer from HQ than the European and US plants.

Factors Contributing to Coordination & Integration. Combined Data Process Standardization 3.9 7 Common Quality standards across plants Product Standardization _m _ 3. 52 Tech. Transfer from Bus. Unit HQ/central R&D Interaction between manager/engineers across plants 3 Interaction between plant-level and bus. unit HQ personnel. I - _..... 3.39 Similar Cost Accounting Systems 3.36 Tech. Transfer across plants in Bus. Unit. 3.25 Similar Production Planning Systems 3.1 Central Sourcing 2I84 Joint Sourcing with other plants 2.76 Joint Prodn. Planning with other plants 2.6 Central Production Planning 2.56 0 1 2 3 4 5 Level of Influence (Means) ---> Plant built outside home country Plant built in home country Process Standardization 85 3.5 Common Quality standards across plants.01.. 4.01 Product Standardization 4.25 3.72 Tech. Transfer from Bus. Unit HQ/central R&D 3.6.3.4 2 Interaction between manager/engineers across plants 3.29 3.59 Interaction between plant-level and bus. unit HQ personnel. 3.11 | 3.65 Similar Cost Accounting Systems 3.17.... 3.55 Tech. Transfer across plants in Bus. Unit. 3.27 3.24 Similar Production Planning Systems....... 2.99....3.23 Central Sourcing._.72.93 Joint Sourcing with other plants 256 2.96 Joint Prodn. Planning with other plants _ 2.4 -,2'8 Central Production Planning 2.5 2.63 0 1 2 3 4 5 0 1 2 3 4 5 Level of Influence(Means) ---> Level of Influence(Means) --->

Factors Contributing to Coordination & Interation -- By Region of Ownershi U.S.A. EUROPE JAPAN I Process Standardization Common Quality standards across plants Product Standardization Tech. Transfer from Bus. Unit HQ/central R&D Interaction between manager /engineers across plants Interaction between plant-level and bus. unit HQ personnel. Similar Cost Accounting Systems Tech. Transfer across plants in Bus. Unit. Similar Production Planning Systems Central Sourcing Joint Sourcing with other plants Joint Prodn. Planning with othe plants Central Production Planning I I 0 I I I I1 3.88 As88 I I I I I I I I l 3.3 I i I I!.......... ~3.66 I I i I~~.4 I I I I~~3.4 - - --- -- --.2 3.1 3.04 I i I i2.6 27 -i I I I I 4.5: I I I I I I I I 4.1 I I I I 1 ""~- ~ ~~3.08 I I i i ~~~~3.31 I I I I 1 Z-"'~ 3.2 I I I I I I I I _ i! = i i 4.15 14.15 3.44' M I I I I I 17 I I I I I I I 1 2.4 78 1 I I i I I I 1 Ett 0 1 2 3 4 50 1 2 3 4 5 0 1 2 3 4 Level of Influence(Means) ---> Level of Influence(Means) ---> Level of Influence(Means) ---> 5

SECTION V - ORGANIZATIONAL SYSTEMS Q1. Who has the primary responsibility for the following tasks for your plant? The following were possible responses to the question 0: don't know/ not sure 1: worldwide headquarters 2: regional headquarters 3: another plant 4: your plant in coordination with another plant 5: your plant Responses 1, 2, 4 & 5 relate to the centralization of the decision making in the organization for a task. For example, if raw material sourcing was centralized the response is likely to be I or 2. Based on this hypothesis, a Degree of Centralization score was calculated for each task. The score is calculated by assigning points to the responses as follows Worldwide headquarters = 4 Regional HQ = 3 Your plant in Coordination with another plant = 2 Your plant = 1 ( note that response 3, another plant, is excluded from the calculation) A higher score implies a higher degree of Centralization of the task. The scores for the data are depicted graphically on the next three pages. Cost Accounting systems, Product Designs and Human Resource Policies rank as the most centralized tasks. Not surprisingly, for these systems and Production Planning, headquarters had a significantly higher control over plants located in the home country than those located outside. The surprising observation is that Quality Standards were much more centralized for plants outside the home country. The centralization score for Cost Accounting systems, Raw Material Sourcin, Production Planning & Control systems and Component/Intermediate Sourcing are noticeably lower for Japanese plants when compared to US and European plants. Product Design and Product Design Changes seem to be more centralized in Japanese owned plants.

Degree of Centralization of Responsibilities Combined Data Choice of Cost Acctng. Systems Original Product Design Human Resources Policies for Management Product Design Changes Choice of Management Information Systems Quality Standards Original Process Design Long Range Production Plans Choice of Production planning & Control Systems Raw Material Sourcing Human Resource Policies for Labor Component/intermediate Sourcing Process Design Changes Equipment Sourcing Production Schedules Maintenance Policies & Practices. ----.... -...............=,,.~_.. -.i! i i! 1. | E | | I | | | s X | | I I I I I I m m m __ - 2.6 2.5J................ 2 " ~ '2.42 i -s~e~r~81~ae~ ~2.22 fl__ l ~~~2.06 rn... '...I2.05.,,,,,~~~! 12.9 1 i 12.83 1 1 1 8 I II I I I I I II I I I I I I I I I I I I I I I I I I I I I I __11. - 1.5 -_ - i '-~3 il~~~~~~~~~~~~~~~~~~~~~ 1.2,7 I, I, I I~ ~ ~ ~~~~ I t I wmm | 1 -3 5 1.81.68 68 3 I I I I I I I I I I I I I I I I - - - I 0 0.5 1 1.5 2 2.5 3 3.5 Centralization --— >

e gree 0 en ra iza on o es ons bltes m ased on loca ion o pant Plant built outside Home Country Choice of Cost Acctng. Systems Original Product Design Human Resources Policies for Management Product Design Changes Choice of Management Information Systems Quality Standards Original Process Design Long Range Production Plans Choice of Production planning & Control Systems Raw Material Sourcing Human Resource Policies for Labor Component/intermediate Sourcing Process Design Changes Equipment Sourcing Production Schedules Maintenance Policies & Practices 'lqp~lP*~l~llpl~%~ g~ '2.41 Is"Be~ lll I _I = ~33 3.03 2.4 I 2.7 112.08 fl....... 2.7 fl A_ E~~~~ 2.62 X_ A I 4 5 Plant built in Home Country....... _ _ — _ -|_~~~~ _~~3.39!,! 3.01 3.14 2.77! -__ 2 ~~~~2.92...........ai__-' 2.21 2.53!~~~~~~~~~~~~~~~~~ _7 2.25 |ll_ ~ ~~~~2.58' 2.33 tsstar Il~ll1I~B11 1.61: '1 1.36 I. BIIIB$]~~~~~~~~~~~~~~~~"a~~~~~~~ la~~~~~~ile~~~~~ i. I 12.17.96 92..97 I I I~~~~~~~~~~~~~~~~~~~~~~~~~~ -—. —~.~ —~p~~-cl ~ mm~ I — __B 4-im-ll — l: 1 1.5 1.38 1.22 _ 1.22 I I 4 mmlmlmim_1.57: lm lmlmmi 1.64 1.36 -1 1 1.34 I 02.41.92 II II II 0 1 2 Centralization --— > 3 4 0 1 2 Centralization --— > 3 4

Degree of Centralization of Responsibilities - by Region of Ownership U.S.A. EUROPE I I I Choice of Cost Acctng. Original Produc Human Resources for Management Product Design Choice of Man Information Sy Quality St Systems:t Design;Policies I- _. _ _3.3 I I I ~3.04 a I1 I Changes agement stems tandards Original Process Design Long Range Production Plans Choice of Production planning & Control Systems Raw Material Sourcing Human Resource Policies for Labor Component/intermediate Sourcing Process Design Changes Equipment Sourcing Production Schedules Maintenance Policies & Practices --. 2,81 1~ ~ 1 2.79 2.25, 2.,4 2.13 _ _ L c;~2.49 ' I I I 1 A ~~~~~~~~.6 II i I JAPAN I I i I Y1.95 51~ ~ ~ ~ ~..."" --- 3.4 33 - ~ 2.54, i1!__1I I l== _ _ I 1' '-" —'~" 3.05 i i 6~ - ' ---'~ ~ ~~~~~~2.13;:2 ~~~~~~~~~~~~~2.65 i3 I PP~g~e~a~a ~ 2.38 2.03 ~~~~~1.37 I * _O A, f | I 18 _ 3ss ooi 051 1 i ~2 1 k~lS~ I~H~ B 1.43 ~~~~1.24 I I,,, I 133.3 l.88 i I, i 1.4 I I, I ~1.15 72 2 1., - >. I i I I, 3 1.4 01 3 l. l ~ _ _gI qo ' I 1 1 L3,, I __ _2 0 ' I I, I 1.3 ' ' I I,.w _ _ 1.24 * I I L,,I 1 11 33 1 3 __0 1 QQ3 I~~~~~~Cnrlzto _ R ^VV 9 1111~8~a~ 11~811119%1~2.34 _ _ i;1 Q A1 2. 23 __.w~~~~~~~~~~~~~~~~~~~~~ --— 2-_= _/~~ ~1 1 I ~sl~a~ls1.4 6 _ _ 1 779mu 1.22 _ _ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I II I I II I I II I I I 0 1 2 Centralization --— > 3 4 0 1 2 Centralization --— >

SECTION VI - PERFORMANCE Q.1. How well does your plant perform compared to the world standard (best possible performance) with respect to each of the following dimensions? The responses ranged from 1: hopeless to 5: On par with the best possible performance in the world. For the purpose of this analysis, responses that ranged from 1-3 were combined to arrive at a percentage of respondents who believed that their plant was below world standard on a dimension. Similarly, 4 & 5 were combined to calculate the percentage who believed that they were at least on par with the world standard on a dimension. The grouped responses are depicted graphically in the next three pages. The aggregate data indicates that more than 80% of the respondents in our sample believed that their Product Qualitv and Delivery Performance were on par with world standard. For every dimension, except Flexibility and Productivity, plants built in the home country received more 'on par with world standard' responses than plants built outside the home country. Japanese owned plants had higher percentages of 'on par' responses than the US and European owned plants on every dimension. This is more noticeable on the dimensions Labor Productivity, Inventory Turns & Flexibility.

Combined Data Product Cost Position Product Quality Delivery Performance = Labor Productivity i; Inventory Turns _ Cycle Time Flexibility: volume changes. Flexibility: product mix changes _ V Process Innovation!i:i; Product Innovation Speed of New Product Introduction 0% 20% 40% 60% 80% 100% Percentage of Responses M On Par with World Std. D Below World Std.

Performance Compared to World Standard Plant Built outside Home Country Plant Built in Home Country Product Cost Position Product Quality Delivery Performance Labor Productivity Inventory Turns Cycle Time Flexibility: volume changes Flexibility: product mix changes Process Innovation Product Innovation Speed of New Product Introduction 0% 20% 40% 60% 80% 100% 0% Percentage of Responses m On Par with World Std. Below World Std. 20% 40% 60% 80% 100% Percentage of Responses l On Par with World Std. I Below World Std.

___ Performance Compared to World Standard - by Region of Ownership U.S.A. Europe Japan Product Cost Position Product Quality Delivery Performance Labor Productivity Inventory Turns Cycle Time Flexibility: volume changes Flexibility: product mix changes Process Innovation Product Innovation Speed of New Product Introduction / / I 0% 20% 40% 60% 80% 100% Percentage of Responses 0% 20% 40% 60% 80% Percentage of Responses 100% 0% 20% 40% 60% 80% 100% Percentage of Responses mOn Par with World Std.EBelow World Standard