eThesis - School of Business electronic theses

Objectives:

This study is an analysis on the hypothesis of the value added of a product existing in the home country of its manufacturing company. It correlates with the home country being the origin of the product's intellectual property. The aim is to understand the role of Finnish companies in the economic situation where manufacturing is increasingly offshored towards low cost regions. The research questions are the following: How are tasks distributed within the value chains of two mechanical engineering industry case products? What is the main source of value added in the case products? How is the value added of the case products distributed geographically? What are the implications of offshoring in the case value chain?

Research method:

The research is conducted as a qualitative case study of a Finnish mechanical engineering company that has partially offshored its production to Asia. The value added of the case products is calculated by examining the prices and countries of origin of the product components, the countries of origin of the component manufacturers, and their key financial data. The acquired data is analyzed in the light of Porter's value chain model, a theory on assembly capturing only a minor share of a products value added, and pioneer Finnish value added research.

Results:

The data reveals that production is beneficial when executed elsewhere from the value adding activities if it diminishes logistics costs. This applies especially for heavy and service intensive products. Offshore production reduces home country share of value added, which could be further researched from the points of view of national economic growth and the innovation capacity of nations.