Case Study: Read the following case and answer all the questions that follow.
Dyson relocates production to Southeast Asia
From the Eight Samurai of Penang's electrical and electronics industry to Volvo kick starting Shah Alam's automotive industry, the development of Malaysia's manufacturing sector is inextricably linked with foreign direct investment. As these foreign companies built their bases in Malaysia, they developed local supply chains to ensure the smoothness of their operations and to maintain costs. Over the years, these suppliers became huge producers in their own right, employing engineers, technicians and other workers in the thousands. Down south in Johor, one company stands out for developing the state's high-value manufacturing ecosystem. Since 2003, Dyson Ltd has made Senai its global manufacturing hub. Over the last 15 years, the UK-based producer of high-tech home appliances has injected billions of ringgit into the economy by outsourcing its production to local contract manufacturers, some of which have grown into large, public-listed companies. With its local partners, Dyson produces 15 million units that are exported to more than 75 countries worldwide. For instance, Angelenos (natives or residents of Los Angeles) make use of Malaysian-made Dyson bagless vacuum cleaners. While contract manufacturing is a tested and proven business model, technology is not necessarily transferred. However, in the case of Dyson and its manufacturing partners, the sharing of knowledge, skills and technology is embedded in the partnership because locally produced parts and components have to meet Dyson's high standards of quality. "With our contract manufacturers, we design the production line, control procurements and production processes because almost everything we make is unique to us," founder Sir James Dyson tells Malaysian journalists at a recent roundtable session. The company takes pride in coming up with new solutions to everyday chores, such as high-powered hairdryers, bagless and cordless vacuum cleaners, and bladeless stand fans. These technological innovations require very specific and high-quality parts and components. Dyson's relationship with Malaysian parts and components manufacturers had started years before the company moved its manufacturing operations to Johor as it sourced plastic parts and components from Malaysian producers. But when the company decided to move its production to Johor, it had to source a lot of other parts elsewhere as the local producers did not have the capability. For example, as Dyson uses aluminum tubes in its products, it taught Malaysian producers to make the parts to its stringent specifications and quality standards, and also imported specific machines and tools to enable them to fulfill their contracts. Consequently, the skills and technological capabilities of local manufacturers improved. "Dyson is very different; we develop and design every component in our products. How it is made is very important to us, so we control the manufacturers, we control the quality, purchasing and so on," Sir James points out. "We are not contracting out; we are heavily involved with the manufacturers and teaching them how to make each of our products as it comes out." Although making every product unique and cutting-edge has resulted in Dyson's products being priced beyond the affordability of many, especially in the emerging markets, Sir James stresses that the process is key to maintaining the quality of each product. "If we just outsource the production, for example, a vacuum cleaner manufacturer in China, we might have a cheaper product but it would be a very much worse product, in my view. And I am not sure that they can do it either, not because they are incompetent but because everything we do is very specialized, very different and ground-breaking," he says. It is worth noting that Dyson has also developed and tapped Malaysian talent by setting up a research, design and development (RDD) centre in Senai, Johor. Called the Malaysian Development Centre (MDC), it employs 1,200 people with 80% of the workforce being Malaysian. Most of them are engineers who test the hardware of Dyson products to ensure their physical and functional durability. Although Malaysia is undeniably a lower-cost production centre than the UK, Sir James reveals that the quality of the local workforce and graduates was a key reason for Dyson's shift to Johor. To source local talent, Dyson partnered with local universities to ensure graduates met the company's standards, and co-developed programmes to cultivate the available talent in the country. One such programme is the James Dyson Awards, which is open to university-level students and recent graduates studying product design, industrial design and engineering. Participants are required to come up with inventions that could be applied to improve people's livelihood.
Question 1: Workers in the UK were concerned about unemployment once Dyson relocated to Malaysia. Provide your comments on the issue.
Question 2: Examine the implications of Dyson's investment in Malaysia.
Question 3: Evaluate the strengths and weaknesses of the entry mode adopted by Dyson in the Malaysian facility.
Question 4: Elaborate the changes in organisational architecture when Dyson expands into international market.