Just like the other industries such as apparel, electronics, and consumer goods, the automobile industry has accelerated its foreign direct investment, cross border trade and global production. The automobile industry has increased outsourcing and bundled value chain activities in major supplier chains. As a result, more developed countries that serve as suppliers have increased their involvement in trade and FDI. With these increased supplier capabilities, large national suppliers have become global suppliers and are now controlling multinational operations. This is because of their increased capability of providing good and services to various lead firms all over the world. The automotive industry has a distinct firm structure. This enables it to exert a lot of pressure and power on extremely small firms. Production in the automobile market is dominated from lead firms in Japan, USA, and Germany. It is without a doubt that the automobile industry has resulted to massive effects on globalization. This article discusses the effect of the automobile industry in globalization, and reviews which part of the automobile industry has affected globalization.
How did the automobile industry effect globalization?
The automotive industry has been in the global scene since its inception. Off shoring of vehicle production was begun with the mass production of system of Henry Ford, which came alongside mass markets. The automotive firms in America pioneered the early age of globalization in the 1900s. Firms such as General Motors’ are remembered for their production
of facilities outside America a year after the company was founded. Since 1913, the automobile industry has undergone tremendous changes. The automotive industry underwent a series of globalization from around the 1970s. Around this time, foreign investments especially in manufacturing facilities started increasing with companies such as Honda and General Motors starting to transport manufacturing and production facilities offshore. Participation of developing economies in globalization of the automotive industry was enhanced by innovations in telecommunication, technology development, and transportation. These elements made it possible for the industry to fragment its production processes and creation of smaller assembling plants that were located in different regions of the world. This segmentation of production processes created multiple global production networks and expanded the global market making many developing countries reap the benefits of globalizing the automotive industry (Maxcy 108).
The auto industry adopted new globalization trends that could steer the restructuring of global manufacturing in order to meet the challenges of global economies. There was the need to improve on efficiency and maintain a competitive level in the automobile industry. Automotive manufacturers from Asia, Europe, and the US adopted global trends such as integrating low- income...