Designed in Germany, Assembled in Portugal: A nearshored German classic - The Teddy Bear


Essay, 2010
12 Pages, Grade: 1,7

Excerpt

Table of Contents

Situation & Complication until 2009 - Outscourcing to China

The current Solution - Nearshoring as Steiffs’ Global Strategy

Conclusion

Appendix

References

Declaration

Table of Figures

Figure 1- Overview: Framework of three globalization problems in China

Figure 2- Overview: Reasons for not just coming back to the home base Germany

Figure 3- Overview: Shore definitions

Figure 4- How to foster nearshoring in Portugal?

Figure 5- Integration Responsiveness Framework

Figure 6 -Overview: Portugal’s Economic & Business Environment | Labor Market

Situation & Complication until 2009 - Outscourcing to China

The global toy manufacturing market is dominated by Chinese competition.3 In order to survive the battle of international competition, multinational companies have to get maximum process efficiencies and highly effective business outcomes.4 For this reason “ international business depends on balancing the benefits and risks associated with doing business in a country ” 5. Steiff thought that they could win this battle by out- scourcing large parts of their production to China,6 but by late 2009 the main activators for repositioning the brand were the concerns, which are shown below7,8:

illustration not visible in this excerpt

1- Overview: Framework of three globalization problems in China (by Graven | 2009)

By moving to China Steiff tried to participate from the first mover advantage9, but did not succeed. Their new strategy was against the business trend of leaving Europe10 and sourcing the whole production in: Steiff has 550 employees in Tunisia, 300 in Germany and 100 in Portugal. Through this operation Steiff transfers “ compe- tencies, skills, and know-how from the established operations [ … ] to the new wholly owned subsidiary. [That] are principal ways of creating value11 with less potential for unpleasant surprises.

Figure 2 shows a couple of reasons for not just inshoring everything back to Ger- many:

- High wages,
- strong labor unions,
- nontransparent tax system…

… make Germany less attractive as a business location.

Due to technological progress and decreasing logistic costs, it is cheaper to relocate these processes and work!ows abroad instead of having the work done in Germany.

2- Overview: Reasons for not just coming back to the home base Germany

This essay focuses on insourced nearshoring in the emerging market Portugal. I am convinced that there is currently a much higher potential of developing a fruitful business for Steiff through nearshoring in Portugal than staying outscored in China. The advantages of near shoring are fundamen- tally the same like off- shoring: significantly lo- wer costs at an equal or improved quality of services, as well as flex- ible additional produc- tion capacities. Graphic 312 illustrates the main differences.

illustration not visible in this excerpt

3 - Overview: Shore de!nitions

The current Solution - Nearshoring as Steiffs ’ Global Strategy

It is most important to access the right market at the right time to reposition and adjust the company surviving the battle of international competition. In doing so, “ an international market entry is an institutional arrangement that makes possible the en try of a firm's products, services [ … ] into a foreign country. ”13 14

illustration not visible in this excerpt

4 – How to foster nearshoring in Portugal

Steiff’s strategic assets and responsibilities are centralized in the headquarter.15 Nev- ertheless, as figure 2 shows, the home country factors are costly and complex. Therefore Steiff needs an additional innovative location for manufacturing. Being the owner, they took the decision to invest direct in a wholly owned subsidi- ary, even though they bear the full costs. With this reasonable decision Steiff had to find a country, that meets their sophisticated production requirements.

Manufacturing stuffed animals does not demand pressure for local respon- siveness, because trained employees are always able to seam teddies in the same line. The world market is served with standardized teddies.16 There is no need to constantly adopt skills for example form different cultures. The job description sug- gests a high-skilled routine independent of the location.

[...]


1 Co-CEO Frechen is talking about the company's reputation for hand-made production: “For children, surely only the best is good enough - the best design, the best production, the best safety standards. We want to make the most beautiful, best and safest stuffed animals in the world. Steiff puts a great emphasis on its manufacturing philosophy.” (Wiesmann | 2010)

2 e. g. The animals were often sloppily sewn together. (Wiesmann | 2010)

3 Mr. Frechen says, Chinese toy manufacturers “always think in terms of price and volume”. (Wiesmann | 2010)

4 http://www.hbs.edu/global/research/international/ | 05.16.2010

5 Hill | 2000

6 for detailed information about China: please find attached

7 “The things we wanted to be done were not the things the Chinese were used to doing. Cheapness meant an end to uniqueness. We have learnt our products are better if we make them ourselves. So we switched from price back to quality” (Wiesmann | 2010).

8 e.g. While Knut was turning from a cuddly baby into a larger, not-so-cute polar bear, thousands of stuffed animal versions of baby Knut were still en route to Europe. As a result, Steiff was unable to take full advantage of all the hype surrounding the celebrity animal.

9 A sometimes-insurmountable advantage gained by the first significant company to move into a new market, but this may or may not translate into business success. (http://www.marketingterms.com/dictionary)

10 http://businesstrends.wordpress.com/category/importing-from-china | 05.16.2010

11 Hill | 2000

12 by Häßlinghaus | 2008

13 For more infomation about Portugal: please find attached

14 Reihlen | lecture notes “Globalization & Strategy“ 5 | Chart 9

15 cf. Bartlett |1989

16 author`s note: Steiffs marketing strategy is to sell standardized teddies which are copied from nature and not a short-lived TV show.

Excerpt out of 12 pages

Details

Title
Designed in Germany, Assembled in Portugal: A nearshored German classic - The Teddy Bear
College
Leuphana Universität Lüneburg
Grade
1,7
Author
Year
2010
Pages
12
Catalog Number
V167040
ISBN (eBook)
9783640832705
ISBN (Book)
9783640833054
File size
1581 KB
Language
English
Tags
Nearshoring, Steiff, Portugal, Globalization, Strategy, Porters Diamond
Quote paper
Susanne Handorf (Author), 2010, Designed in Germany, Assembled in Portugal: A nearshored German classic - The Teddy Bear, Munich, GRIN Verlag, https://www.grin.com/document/167040

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