Firm's Transformation And Upgrading Strategy

During past 30 years, China's economic reforms and opening was along the road that inserting into the global production networks, which plays a role of manufacturer for Western buyers. Due to the export-led strategy, China has been successful in attracting foreign capital and established huge production capacity in various industries. Finally, China achieved a significant economic growth and continues to be rapid urbanization in past two decades. In 2010, China overtook Germany and Japan became the largest exporter and second largest economy in the world.Despite increasing integration with global economy, China faces a number of difficult challenges that could undermine its growth and stability, which including shortage of labors, rapid rising of worker's wages and the pressure of RMB exchange rate appreciation from USA and Western. In addition, because lack of innovation technology and brand advantages, China's original equipment manufacturer(OEM firms) earns very small and poor margins in global value chains and often suffered from overcapacity or price competition. China's want to change its economy development way from manufacturing-led pattern to a consumer-driven pattern. The transformations and upgrading is a tough and urgent issue in front of Chinese manufacturer and OEM firms.The thesis describe the essential difference among three approach of firm's transformation and upgrading theories, which are enterprise capability, technology innovation and international specialization. Through analyzes the global value chains theory and address the case study of transformation and upgrading strategy of Pearl River Delta's Taiwanese footwear industry, we found that cheap labor is only a lower order competitive advantage in global production networks. There are more significant factors and higher order advantages for local firms to build up such as proprietary technology, product differentiation, brand reputation, customer relationships, and constant industrial upgrading. Different company can use their specific resources to build their unique advantages and implement their own upgrading strategy. The thesis has some innovations both in theoretic and practice.