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Beyond offshoring: assess your company's global potential
1McKinsey Global Institute, McKinsey & Company, San Francisco, USA.
Harvard Business Review
|December 21, 2004
Summary
Globalizing supply chains and production processes can significantly reduce company costs, offering substantial savings beyond simple offshoring. Strategic implementation unlocks new markets and customer bases for businesses.
Area of Science:
- Business Strategy
- Global Economics
- Supply Chain Management
Background:
- Companies recognize cost reduction potential through offshoring.
- Globalization's transformative impact on industries is often underestimated.
- Current strategies frequently overlook the full scope of globalization benefits.
Purpose of the Study:
- To analyze the comprehensive impact of globalization on industry transformation.
- To provide a strategic framework for companies to capture globalization opportunities.
- To detail cost-saving and value-creation levers across globalization stages.
Main Methods:
- Analysis of industry globalization spectrum.
- Identification of production, regulatory, and organizational barriers.
- Definition of five stages of globalization.
- Assessment of cost-saving and revenue-generating opportunities.
Main Results:
- Globalization can reduce total costs by up to 70%.
- Offshoring accounts for 50% of potential savings, with process improvements and task redesign contributing.
- Strategic globalization enables price reductions and market expansion.
Conclusions:
- Few businesses fully leverage globalization's performance improvement potential.
- A step-by-step approach is needed to assess and capture globalization opportunities.
- Understanding industry-specific challenges and stages is crucial for effective globalization strategy.