International allocation of value chains

The emergent strategy of Ikegami Mold Engineering

Abstract

It has been explained in the past that multinational firms gain competitive advantage by creating a structure for the international division of labor through allocating certain activities in their value chains to advantageous locations. Actually, however, a firm's subsidiaries are exposed to business environments that differ from those of their home country; hence, an international division of labor may have resulted from an emergent strategy. The Ikegami Mold Engineering Group has production sites in Japan, Mexico, and China that manufacture and sell molds. The Mexico site differs from the others in that it repairs and overhauls molds. This business was not planned in advance but was rather built from an emergent strategy because of the business environment in Mexico: the industrial infrastructure is not suited to the manufacture of molds, the Mexican market exhibited demand for the repair and overhaul of molds, and Ikegami had built up the technological capabilities to respond to that need. Thus, a new business was born to repair and overhaul molds.