Global Business- Strategic Planning

(Import, Export & Manufacturing)

Global Supply Chain Overview

Global Business Framework(Logistics, Economic, Cultural,

Political & Legal)

Contract(Products

&Services)

Insurance&

Risk Mgmt

OthersCertifications etc.

Funds Transfer SystemP&S

Delivery System

Exporter Importer

Why should you go global?

• Increasing Globalization markets

• Increase Globalization of production

• Increasing Globalization resources

• World is becoming a large global village

• Going Global has become essential to maintain competitive edge in domestic as well as world market

Six Reasons For Global Sourcing

1- Superior Quality2-Better timeliness- lesser lead time than local sources

3- Lower Cost

4- Broader Supply Base

5-More advanced Technology6- Expanded customer base- sell in that country

Global Supply Channels• Import merchants- import and sell goods themselves

• Commission houses- Source for you from exporter abroad, no commission by you, goods billed & shipped to you directly, do handle docs.

• Agents or representatives- Represent sellers, do handle documents

• Import brokers- Bring buyer-seller together, both pay commission.

• Trading houses- Far more organized, handle all aspects of transaction

• Subsidiary company- Fully owned by parent co., levy service charge

• International Procurement office- Office in foreign country

• Directly from Supplier/manufacturer- No intermediary

Growth Stages to Global Supply Management

1-International Purchasing- Focus on volume, minimize price, manage inventory costs; entry phase to global arena

2-Global Sourcing- Focus on global opportunity, supplier capability, strategic production support, customer service supports,- already off shored for some time

3-Global Supply Management- Focus on optimizing supply network, effective logistics and capacity management worldwide; technological leadership

4-Tansnational Corporation- Next stage of evolution; Instant communication and funds transfer capability; real time operations of buying, selling, tracking etc

Potential Risks and Problems

• Cultural Issues- Hong Kong example of four

• Long lead time

• Additional inventories

• Lower quality• Social and labor problems-Nike Sweat Shop

• Higher cost of doing business• Opacity risk- Global opacity index

Questions before going global

• Does it qualify as high-volume in your industry?• Does it have a long life (2-3 years)?• Does it lend itself to repetitive manufacturing?• Is demand of the product fairly stable?• Are specifications and drawings clear and well

defined?• Is technology not available domestically at

competitive prices?• Will there be adequate warrantees and back up

support?If answer to these questions is yes, evaluate support network with in your firm

Evaluating internal support network

• Engineering support to facilitate change?• Will there be enough time to phase out

existing pipeline inventory?• Will supply source provide required

education and training• Are you prepared to make financial

commitments?• Is your firm fully aware other factors

effecting source of supply?

Direct Supply Sourcing

• Start with intermediary source• Trade Directories & Embassies• Trade fairs• Goggle Search• Initial contacts-by e-mail, letters and telephone

• Personal meeting- Prepare; commercial,technical, cultural

• Negotiations- prepare; price and other areas of interest

• Samples and trial order• Bulk order

Major Issues in Global Supply Management

• Shipping, warehousing and delivery issues• Methods of Payment• Currency exchange related risks• Documentation related issues• Inspections and quality assurance

management• Counter Trade• Regional Trade alliances

Transportation and delivery issues

• Which mode of transport to be used-Sea, Air, Surface, multimodal

• Full container of part container (20 ft, 40ft)

• Temporary/ in transit storage

• Liner or chartered vessels

• Break-bulk carriers

• INCOTERMS

Currency and payment issues

• Currency and Exchange rates

• Methods and terms of payment-L/C, direct and others

• Hedging and currency risk management- forward & option currency contacts

• Insurance and in-transit risk management-Clause A,B & C

Counter Trade

• What is Counter trade- Part of full payment by goods instead of money

• Barter- Goods exchanged for goods, no money involved

• Offset –Cash/Goods Swiss buy F-16, sell Elevators to USA

• Counter purchase- Buy & sell products in local currency Russian example

• Buy back/compensation- Seller of Capital goods accepts part of payment by products manufactured by their machines

• Advantages of CT: circumvent currency controls, restricted currency areas, Cash short countries

• Disadvantages of CT: ???

Political and Economic Alliances• EU- European Union , Euro Currency

• NAFTA- North American Free Trade Agreement

• Mercosur- Argentina, Brazil., Paraguay, Uruguay; Chile, Bolvia • ASEAN- Association of South Asian Nations

Indonesia, Malaysia, the Philippines, Myanmar, Singapore, Thailand Brunei, Laos, Burma, Cambodia and Vietnam

• APEC- 21 Countries (Asia Pacific Economic Cooperation)-large area, 45% of world GDP; China, Russia, Canada, USA, Australia

• SAARC- South Asian Association for Regional Cooperation-created in1985; India, Pakistan, Bangladesh, Shri Lanka, Nepal, Bhutan and Maldives

• SAFTA - South Asian Free trade agreement(2013)

• OPEC (Organization of Petroleum Exporting Countries) Role in 1970’s- Fixing prices & production quotas-Crude prices $3/ to $12: now $60 per barrel

Methods of Entry in Foreign Export Markets

• Indirect Exporting– Export Trading Company

– Export Management Corporation

– Piggy- Backing

• Active Exporting– Agents

– Distributor

– Marketing Subsidiary

– Coordinating Direct Export Strategy

– Foreign Sales Corporation

Entering in Production Abroad

• Contract Manufacturing

• Licensing

• Franchising

• Joint Venture

• Subsidiary

Some Useful websites

Reading References

• World Class Supply Chain by Burt, Dobler & Starling- Chapter 16

• Global Supply Chain Management by Douglas Long Chapters 10,11 &12