Profit margin, process improvement and capacity decisions in global manufacturing

We study two strategies that a company may employ for competing in global m arkets: high profit margin; and investment in process improvements. The str ategy of high profit margin is associated with aggressive investment in new plants worldwide; and the strategy of process improvements is associated w ith increasing the effective capacity of existing plants, reducing manufact uring cost and increasing the plant's life cycle. Such plant decisions are complicated by country-specific parameters, e.g. tariff rate, tax rate, tra nsportation cost and economic growth rate, which may vary widely from one c ountry to another. We construct a simulation model that uses non-linear rel ationships among decision variables to explore insights, e.g.: (i) global c onditions that would be synergistic with each of the two strategies; (ii) l evel of investment that would be justified in newly industrialized countrie s, in relation to the industrially mature countries; and (iii) shifts in in vestment in time and their relationship to the competitive strategies.