The trend of economic nationalism (e.g., Brexit) that is affecting many countries around the world promotes keeping manufacturing jobs in the local country. As management accountants, we are concerned about how this trend will affect companies, particularly global companies, as they strive to adapt their strategy and value chain to the new economic nationalism. Two industries that are relevant in this matter are the textile industry and the pharmaceutical industry.

The Textile Industry. Some companies in the textile industry (where production of raw materials has been moving abroad for decades) have noticed that along with the reduction of raw material production in the U.S., there has been a loss in the number of engineers and managers who are able to direct textile production. In India, China, and Pakistan, on the other hand, a large number of students are graduating with the skills necessary to deal with the production of fabric.

The Pharmaceutical Industry. The upstream activities of research and development for new drugs is a key competitive factor in the industry. However, the downstream activity of drug manufacturing, especially for generics, is more mundane, and has generally been located in the lowest-cost countries.

Required

For each of the two industries above, textiles and pharmaceuticals, answer each of the following questions:

1. Which competitive strategy (cost leadership or differentiation) do you think most companies in each of these industries are using, and why? Would the decision by a company in the industry to relocate manufacturing into or out of the U.S. affect this strategy?

2. How would the relocation of manufacturing facilities to different countries affect a company’s value chain in each of these industries?