introduction to international operations management
TRANSCRIPT
Introduction to International Operations
Management
POPULATION OF MINI WORLD
There would be:• 57 from Asia• 21 from Europe • 14 from Western Hemisphere (North & South America)• 8 from Africa• 95 would live outside the U.S. • 70 would be Non-White; 30 would be White• 70 would be Non-Christian • 50% of world’s wealth in hands of 6 people – all from the U.S.• 70 unable to read • 50 suffer from malnutrition • 80 live in substandard conditions• 1 of 100 has a university education
If we could shrink the world’s population to a village of 100, with people and nations remaining the same, below is how we would look …
BUSINESS ENVIRONMENT
Operations
Finance
Economics
ManagementMarketing
Information Systems
Accounting
• Improvement of organizational activities to ensure quality, customer satisfaction , and loyalty
•Investments•Capital•Stock Market
•Nceufhkurreffg
•Org. Behavior•Policy•Strategy
•Sales•Promotion•Research Behavior
• The application of people, technologies, and procedures to solve business problems
•Bookkeeping•Pensions•Audits
•The study of how the forces of supply and demand allocate scarce resources
WHY GO GLOBAL?
Reduce costs Improve supply chainProvide better goods and services
Attract new marketsLearn to improve operations
Attract and retain global talent
SPECIFIC DRIVERS OF GLOBALIZATION
Political forces
• Reduction of barriers to trade and foreign investment by governments
• Privatization of former communist nations• Porous borders between countries
Technology forces
• Innovations in computers, information technology, communications technology (Internet, networking), and transportation
Market forces • The globalization of financial markets;• Globalizing companies become global customers
Cost forces • Goal for economies of scale to reduce unit costs• The creation of a global labor force• Rapidly falling freight costs
Competitive forces
• Increase in intensity due to explosive growth in international business
INTERNATIONAL ENVIRONMENT
Environment All the forces influencing the life and development of the firm
ForcesExternal Forces (Uncontrollable) – Forces over which management has no direct control
Internal Forces (Controllable) – Forces that management can use to adapt to external forces
The International Environment
Economic:Trade Agreements
Trading BlocsGNP/Wages
Inflation
Legal:International Law
Host Country LawsHome Laws
International Piracy
Infrastructure:Communications
InternetTransportation
Technology
Cultural: Customs
ValuesLanguageReligion
Political:Governments
IdeologyStability
Civil Strife
TheInternational
Company
EXTERNAL FORCES
Uncontrollable External Forces: Forces over which management has no direct controlCompetitive Competition (kind, number, location) in other countries
Distributive Distribution channel forces for distributing goods and services
Economic Economic infrastructure: GNP, unit labor cost, personal consumption expenditure
Socioeconomic Characteristics of human population (market demographics)
Financial Capital markets: interest rates, inflation rates, taxation
Legal Laws governing how international firms must operate, e.g., property rights
Physical Topography: climate, and natural resources
Political Forms of government, international organizations; nationalism, political risk
Sociocultural Language, values, attitudes, beliefs, and opinions
Labor Quantity, quality of skills, attitudes of labor
Technology Modern or primitive equipment and skills that affect how resources are converted to products
INTERNAL FORCES
Internal Forces (Controllable) – Forces that management can use to adapt to external forces
Factors of Production
Capital, raw materials, and people
Activities of the organization
Personnel, finance, production, and marketing
Multi-national Companies…
US Suppliers
Off Shore Suppliers
US Factory
Singapore Factory
US DC
European DC
Asia/Pacific DC
Americas Demand
European Demand
Asia/Pacific DemandKit Suppliers
TYPES OF INTERNATIONAL OM DECISIONS
Strategic- long term, often involving acquiring new resources- e.g., power station construction (at electric utility)
Tactical - medium term, utilization of existing resources- e.g., workforce commitments
Operational- short term, execution of schedules or control activities- e.g., shift scheduling (in a hospital)
Forecasting demands in different cities around the world
RESPONSIBILITY FOR QUALITY
Customer
Service
Packaging andStorage
Inspectionand Test
ProductionProcessDesign
Procurement
DesignEngineering
Marketing
QualityProductOrService
WHERE WOULD YOU LOCATE…
An amusement park? A new pharmacy?
Amazon’s new distribution center?
FACTORS TO CONSIDER…
Length of summer season?Sufficient population? Quantity of labor?Labor costs?Local laws?
Distances to surrounding community?Patient traffic?
Distances from online customers?Transportation costs?Unions?Taxes?
An amusement park in ALASKA?A new pharmacy?
Dabur’s new distribution center?
Where to locate franchises?
IOM Decisions
AIRPORTS IN DIFFERENT CITIES AROUND THE WORLD
GLOBAL SUPPLY CHAIN MANAGEMENT
Involves total systems approach to managing flow of
MaterialsInformationFinancesServices
Global Supply-Chains
ConsiderationsCostsControlExpertise DistanceLanguagesLaws and regulations
GLOBAL SOURCING
GLOBAL SOURCINGThe Lure of Global
Sourcing•Suppliers with improved competitiveness CostQualityTimeliness
•Suppliers in less developed countries (LDC) with low-cost laborAttractive for labor-intensive products with low skill requirements
FORD’S GLOBAL NETWORK TO SUPPORT THE MANUFACTURING OF THE ESCORT
LOGISTICS
Movement of materials
Must interface with sourcing , manufacturing, design, engineering and marketing– Packaging and transportation
requirements can greatly increase logistics costs
– Many companies outsource logistics
Container Ships Are Getting Larger
WHY IS INTERNATIONAL OPERATIONS DIFFERENT?
Domestic Environment
Foreign Environment
International Environment
•All the uncontrollable forces are in the home country that surround and influence the firm’s life and development
•All the uncontrollable forces that originate outside the home country that surround and influence the firm have •different values •difficult to assess •Interrelated
• Interaction between domestic and foreign environmental forces or between sets of foreign environmental forces
Key Point: Increased complexity for decision-making
GLOBALIZATION IS THE FUTURE AND CANNOT HAPPEN WITHOUT INTERNATIONAL OPERATIONS
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