Impact of Regional Integration on Creating Supply Chains in a Globalized World
MAGAZINE №2 (79) April 2017
AUTHORS KLOCHKO O.A.
CATEGORY Analytics and reviews Global logistics projects Logistic integration and coordination Supply chain management
ABSTRACT
Regional economic integration represents one the most significant trends in the contemporary world economy. Research into companies’ approaches to creating global supply chains in the context of regional integration process is of interest both from academic and business points of view. The research goal is to reveal the regional integration impact on companies’ decisions about trade and investment operations during the process of establishing their supply chains. Strategies and supply chains of most transnational corporations in the world are of regional, not global nature. This can be primarily explained with countries’ proximity and moderate level of risks. Trade blocks and regional unions contribute to the development of regional supply chains as well, and in the process of supply chain creation companies tend to pay more attention to such instruments as reshoring and nearshoring. It is connected with the increase in wages in Asian markets, companies’ underestimation of total costs associated with offshoring, need of becoming closer to customers as well as need to protect intellectual property rights. Impact of information-technological revolution that creates opportunities to and optimize operations costs in developed countries should also be taken into consideration. Global and regional supply chains are established as a result of companies’ foreign trade and foreign direct investment decisions. Export and import operations correlate with trade creation and trade diversion effects. Local producers that do not possess competitive advantages will face treats from external and intraregional competitors, which get opportunities to expand sales and export volumes. Trade diversion effect creates opportunities for intraregional producers, stimulates development of regional chains and may lead to isolation from the rest of the world as well as decrease in international competitiveness. Investment decisions of intraregional producers will primarily depend on the market size and level of trade barriers. As a result regional supply chains may start to develop in isolation from global value chains or organically integrate into them. Companies from participating in the agreement countries will get potential to optimize their investment activities. The research findings can be applied in business operations well as be used by governmental bodies for planning and elaborating on regional integration agreements.
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