A Production‐allocation Approach for International Manufacturing Strategy

An entrepreneur needs a tool on an enterprise level to determine opportunities and threats in a global perspective. The production‐allocation approach described in this article could be such a tool in developing a firm′s international manufacturing strategy. The approach is built around the production and cost function for the relevant manufacturing systems in the integral production chain for a specific product. The main question then is to determine the optimum location of the various manufacturing systems. In this article, the optimum location is the one which minimises the sum of manufacturing and transport costs. A case study based upon research for a European producer of foodstuffs is presented to illustrate the concepts of the production‐allocation approach.