Domestic market stagnation, cost pressures, intensified international competition and chances of emerging markets, have forced the German automotive industry to utilize international location advantages and thus production relocations have become the main strategy to survive in a globalized automotive market. These relocation activities are often viewed as being one-way directed and affected jobs are perceived as being permanent losses for the domestic economy. But in reality, relocation activities are becoming increasingly dynamic and since the turn of the century, more and more cases have been discovered, involving businesses that are returning their productions from abroad.
This study has involved exhaustive research to investigate the current scope and scale of Offshoring and Backshoring activities within the German automotive industry and its impact to the domestic labour market by means of a questionnaire survey. The results of the more than two hundred survey responses show that Offshoring activities continue to proceed and a strong shift in Offshoring activities at present takes place from the Eastern European to Asian regions, resulting in agglomeration, “band wagon” effects as well as
excess capacities especially in the Chinese market. The study further shows that relocation activities in the automotive industry nowadays do not necessarily result in higher earnings and constant cost savings but rather contribute to an increased competitiveness and to the future survival of the company. Beside ongoing factor price equalization within the age of globalization, a trend in Backshoring activities as stipulated by the media could not be observed so far. Above all, this can be drawn back on the high cost of Offshoring activities and low profit margins within the industry.
The findings of the study further concluded that Offshoring has indirectly contributed to the safeguarding of productive and especially non productive jobs at the domestic locations. Although
anticipated by press and media, Backshoring does not have any impacts on the domestic labour market.
Table of Contents
1. Introduction
1.1. Motivation
1.2. Reseach Objectives
1.3. Structure and Outline of the Research Project
2. Theoretical considerations
2.1. Industrial Location Theories
2.1.1. Industrial location theory according to Weber
2.1.2. Behaviouristic and institutional location approaches
2.1.3. Kinkel’s holistic model on location determinant factors
2.1.4. Porter’s Model “The competitive advantages of Nations”
2.2. International Foreign Investment Theories
2.2.1. Historical Development of Foreign (Direct) Investment
2.2.2. Classical and Neoclassical approaches
2.2.3. Monopolistic approach by Hymer
2.2.4. Vernon’s International Product Life Cycle Theory
2.2.5. Knickerbocker’s theory
2.2.6. Theory of Internalization
2.2.7. Dunning’s eclectical framework
2.2.8. Behaviouristic Approaches of FDI
2.2.9. New Trade and Location Theory
2.3. Summary of chapter 2
3. Globalisation within the Automotive Industry
3.1. Definition and structure of the automotive industry
3.1.1. Direct automotive industry
3.1.2. The indirect automotive industry
3.2. The history of the automotive industry in Germany
3.2.1. The automotive industry after the 1st world war
3.2.2. The automotive industry after the 2nd world war
3.2.3. Recent history of the automotive industry
3.3. Competitiveness of the automotive location Germany
3.3.1. Factors of success for the automotive location Germany
3.3.2. Challenges for the automotive location Germany
3.4. Situation of the German automotive industry
3.4.1. Turnover and Production
3.4.2. Decreasing domestic and international markets
3.4.3. Cost pressure and concentration process within the industry
3.5. Summary of chapter 3
4. Offshoring
4.1. The Historical Development of Offshoring and Production Relocation in Germany
4.1.1. Development from 1871 until 1945 – The Roots of Production Relocation
4.1.2. The Historical Framework of Liberalisation from 1945 until 1970
4.1.3. The 1970s – The Emergence of Production Relocation in Post-war Germany
4.1.4. The 1980s – Fall of the German Electronic and Entertainment Industry
4.1.5. Since the 1990s – Relocation due to EU extension and market liberalisation
4.2. Terminology of Offshoring and Production Relocation
4.3. Forms of Offshoring and Offsourcing activities
4.3.1. Offsourcing activities in the form of indirect foreign investments
4.3.1.1. International Contract manufacturing
4.3.1.2. International Licensing agreements
4.3.2. Offshoring activities in the form of Foreign Direct Investments (FDI)
4.3.2.1. Joint Ventures
4.3.2.2. Wholly Foreign Owned Enterprises
4.3.2.3. Assembly production
4.3.3. Drivers and Motives for FDI
4.3.4. Scope of FDI in the German automotive industry
4.4. Scholarly Studies of Production Relocation and Offshoring in Germany
4.4.2. Mode and Size of Offshoring Operations
4.4.3. Target Regions for Offshoring Activities
4.5. Motives of Production relocation
4.5.1. Motives for Offsourcing/Offshoring activities in general
4.5.2. Motives for Offsourcing/Offshoring activities for the automotive industry
4.6. Cost for Offshoring/Offsourcing
4.7. Impacts of Offshoring and Offsourcing to the German labour market
4.7.1. General studies on FDI and Offshoring activities on domestic employment
4.7.2. Impacts on Germany and the automotive industry
4.8. Summary of chapter 4
5. Backshoring
5.1. Terminology of Production return relocation and Backshoring
5.2. Scholarly Studies of Backshoring and current state of research
5.2.1. Scope of Backshoring
5.2.2. Form and Size of Operation
5.2.3. Regions of origin for Backshoring activities
5.3. Reasons for Backshoring
5.3.1. Quality and labour related aspects
5.3.2. Cost related aspects
5.3.3. Coordination and start up cost
5.3.4. Cultural and network related aspects
5.4. Costs and Hindrances of Backshoring
5.5. Summary of chapter 5
6. Empirical Investigation of Offshoring and Backshoring in the automotive industry
6.1. Exploratory research questions and development of hypotheses
6.2. Methodology
6.2.1. Questionnaire Design and Construction
6.2.2. Population and database construction
7.2.3. Statistical methods of data analysis
6.2.4. Questionnaire Responses and Representativeness of the Sample
6.3. Current Degree of Internationalization of the automotive industry
6.3.1. Share of goods manufactured at foreign locations
6.3.2. Destination of goods manufactured at foreign locations
6.3.3. Complexity and capital intensity of foreign production
6.3.4. Regions of Foreign Direct Investments
6.4. Current Offshoring/Offsourcing activities in the automotive industry
6.4.1. Form and Size of current Offshoring/Offsourcing activities
6.4.2. Future plans and development for Offshoring activities
6.4.3. Target regions of Offshoring activities
6.4.4. Current reasons for Offshoring/Offsourcing activities
6.4.5. Subsidies and Offshoring activities
6.4.6. Satisfaction with foreign locations
6.4.7. Further aspects and determinants regarding Offshoring/Offsourcing activities
6.5. Current Backshoring activities in the automotive industry
6.5.1. Form and Size of Backshoring activities
6.5.2. Time sequence of Backshoring activities
6.5.3. Current regions of origin for Backshoring activities
6.5.4. Current reasons for Backshoring activities
6.5.5. Offshoring and Backshoring in comparison
6.5.6. Backshoring/Backsourcing - satisfaction and subsidies
6.6. Current influences of Offshoring and Backshoring to the German labour market
6.7. Recent development and future perspective
7. Summary and Conclusion
7.1. Summary of the study
7.2. Conclusion and future Outlook
7.3. Contribution of the study
7.4. Limitation of the study and area of further research
Research Objectives and Themes
This study aims to investigate the current scope, scale, and drivers of offshoring and backshoring activities within the German automotive industry and analyze their impact on the domestic labor market. The research seeks to clarify whether relocation is a permanent strategy or a dynamic process involving strategic reversals, and evaluates the role of performance, cost, and market factors in these decision-making processes.
- Extent of internationalization in the German automotive industry.
- Motives and drivers behind production relocation (offshoring) and return relocation (backshoring).
- Impact of production relocation on domestic employment and competitiveness.
- Role of company size and organizational structure in relocation strategy.
- The influence of subsidies and government incentives on production location decisions.
Excerpt from the book
3.3.1. Factors of success for the automotive location Germany
In the Global Competitiveness Index, Germany received an outstanding score in this pillar and was ranked first as compared to other nations (World Economic Forum, 2009). The country is characterized by an extensive and comprehensive infrastructure that integrates “the state-of-the-art transportation networks with the most modern telematics, IT & communication systems”. (Invest in Germany, 2007a). Particularly for automotive plants it is essential to have a guaranteed steady flow and supply of production materials and components. Just in time or even just in sequence delivery heavily relies on an elaborated logistics system, which can only work efficiently in a highly developed infrastructure.
Sophisticated Business Environment and network clusters
In this pillar Germany was also ranked first. The country has a business sector that is considered the most advanced and innovative in the world and its companies run some of the most sophisticated operations and production processes globally. Particularly performance and network factors as described by Porter (1990) and Kinkel and Lay (2004), such as the concentration of OEMs, supply firms, industry associations, research institutes, colleges and universities, contribute positive effects on the competitive advantage. A most important point is the extensive know-how of the various companies within the network. The ongoing concentration on core competences at the suppliers’ level enables the OEMs to fall back on a pool of highly innovative and qualitative products, which could not be developed and manufactured with in-house technology.
Summary of Chapters
1. Introduction: This chapter introduces the research context, highlighting the globalization of the automotive industry and the strategic necessity of offshoring to maintain competitiveness.
2. Theoretical considerations: This chapter provides the theoretical foundation by reviewing industrial location theories and foreign direct investment (FDI) theories to explain relocation decisions.
3. Globalisation within the Automotive Industry: This chapter analyzes the structure of the German automotive industry and its dependence on global value chains, emphasizing the importance of innovation and networks.
4. Offshoring: This chapter covers the history, terminology, and forms of offshoring, while analyzing the impact on the domestic labour market.
5. Backshoring: This chapter examines the phenomenon of companies returning production to the domestic market, analyzing motivations, obstacles, and the strategic nature of these decisions.
6. Empirical Investigation of Offshoring and Backshoring in the automotive industry: This chapter presents the methodology and results of the survey conducted among German automotive companies regarding their relocation strategies.
7. Summary and Conclusion: This chapter synthesizes the main findings, discusses the implications for the German automotive industry, and suggests areas for future research.
Keywords
Offshoring, Backshoring, Automotive Industry, Germany, Foreign Direct Investment, Globalisation, Supply Chain, Competitiveness, Labour Market, Production Relocation, Outsourcing, Offsourcing, SMEs, Location Factors, Innovation.
Frequently Asked Questions
What is the primary focus of this research?
The research investigates the patterns and motivations behind offshoring and backshoring within the German automotive industry to understand how companies manage production locations in a globalized economy.
What are the central themes discussed in the work?
Key themes include industrial location theories, the history of production relocation, the competitive environment of the German automotive sector, and the empirical results of a survey on relocation strategies.
What is the main objective of the thesis?
The goal is to determine the current extent of internationalization and the motives for relocation, specifically evaluating whether offshoring leads to long-term cost savings or merely serves as a survival mechanism.
Which methodology is employed in this study?
The study utilizes a mixed approach, combining desk research on industrial and FDI theories with an empirical quantitative mail survey of German automotive companies.
What does the main body of the work cover?
The main body analyzes theoretical frameworks for location choice, provides a detailed historical and current analysis of the German automotive industry, and evaluates empirical data from the survey regarding offshore/backshore plans.
Which keywords characterize the work?
Offshoring, Backshoring, Automotive Industry, Germany, FDI, and Supply Chain are the most prominent terms associated with the research.
Does the study confirm that backshoring is a growing trend?
No, the findings suggest that backshoring is currently an exceptional case rather than a broad trend, often serving as a short-term correction rather than a strategic reversal.
How does company size impact the relocation strategy?
The study concludes that large companies are more dynamic and successful in managing offshore/backshore operations compared to SMEs, which often struggle with the financial and management requirements of foreign production.
- Arbeit zitieren
- Dr. Rüdiger Holz (Autor:in), 2009, An investigation into offshoring and backshoring in the German automotive industry, München, GRIN Verlag, https://www.hausarbeiten.de/document/164330
