eWork and Regional Development: eWork Relocation

Concentration in the group or network as rationalisation strategy

This type of relocation of eWork arises from rationalisation strategies at group level. Losses or the impression of lack of efficiency might make the group headquarters initiate reorganisation of the whole enterprise or of particular functions. An alternative cause might be a company merger or buy-out and the resulting attempt to utilise synergies through the integration of functions into single locations or changes in the division of labour. Geographical concentration of activities is central to this type of rationalisation strategy. This implies a geographical relocation of work as the primary objective, even if the reorganisation does not take place under the guise of relocation, but of ‘cost reduction and increased efficiency’. This is not so much a question of finding a more favourable location for a particular activity or company unit, be it the computing centre, a call centre or accounting. It is much more a case of using ICT to concentrate work at an existing or new location and thus exploit economies of scale.

Typical examples of such relocations are transnational companies that are active world-wide and may initiate reorganisation with the aim of cutting costs. This is to be achieved by consolidating previously dispersed, heavily ICT-supported activities at particular locations of the company. The aim is to reduce personnel costs and expenditure on rent and investment, and to make processes more efficient or more easily controlled. Sometimes this involves the geographical concentration of similar functions and the technical specialisation of different units. Such a business strategy can mean repeated relocations. The background and priorities of company reorganisations are very heavily influenced by the specifics of the respective sector. Thus it is not only the competitive situation that gives rise to cost-cutting measures, but also particular business strategies and structures which are highly sector-specific.

What all these measures share is the company management’s objective of achieving economies of scale through the concentration of work. Above and beyond this, concentration of one function in one plant can additionally be motivated by the fact that personnel costs, rents or taxes at this location are lower than they are at others.

(Source: Flecker and Kirschenhofer, 2002)

Examples (names and distinguishing details have been changed to ensure anonymity)

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