transnational strategy
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IONA CollegeIONA CollegeOperations ManagementOperations Management
MBA-540MBA-540Jerry Fjermestad
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Operations Operations ManagementManagement
Operations in aOperations in a Global Environment Global Environment
Chapter 3Chapter 3
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OutlineOutline Global Company Profile: Boeing Why Global Operations are Important Achieving Global Operations
Global Product Design Global Process Design and Technology Global Facility Location Impact of Culture and Ethics
Global Issues in Service Operations
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Outline - continuedOutline - continued
Global Issues in Service Operations Managing Global Service Operations
Global Operations Strategies International Strategy Multi-domestic Strategy Global Strategy Transnational Strategy
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Learning ObjectivesLearning Objectives
When you complete this chapter, you should be able to :
Identify or Define: International business Multinational corporation Transnational Strategy Maquiladora Critical success factors in location analysis
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Learning Objectives - continuedLearning Objectives - continued
When you complete this chapter, you should be able to :
Describe or Explain: Global facility location analysis Cultural and ethical issues in operations Why global issues are important Four global operations strategies
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Boeing Suppliers (777)Boeing Suppliers (777)
Firm Country PartsAlenia Italy Wing flaps
AeroSpaceTechnologies
Australia Rudder
CASA Spain Ailerons
doors, wing sectionFuji Japan Landing gear
GEC Avionics United Kingdom Flight computers
Korean Air Korea Flap supports
MenascoAerospace Canada Landing gears
Short Brothers Ireland Landing gear doors
SingaporeAerospace
Singapore Landing gear doors
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ExamplesExamples Boeing - flourishes because both its sales and
production are world-wide
Benetton - moves inventory to stores around the world faster than its competitors
Sony - purchases components from suppliers in Thailand, Malaysia, etc.
General Motors - simultaneously building four similar plants in Argentine, Poland, China, and Thailand so that they can learn from each other and drive down cost while increasing quality
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Management Issues inManagement Issues in Global Operations Global Operations
Global Strategic Context Differentiation Cost leadership Response
Logistics Management
Location Decisions
Supply Chain Management
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Supply-Chain ManagementSupply-Chain Management
Sourcing Vertical integration Make-or-buy decisions Partnering
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Location DecisionsLocation Decisions
Country-related issues Product-related issues Government policy/political risk Organizational issues
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Materials ManagementMaterials Management
Flow of materials Transportation options and speed Inventory levels Packaging Storage
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Defining Global OperationsDefining Global Operations
International business - engages in cross-border transactions
Multinational Corporation - has extensive involvement in international business, owning or controlling facilities in more than one country
Global company - integrates operations from different countries, and views world as a single marketplace
Transnational company - seeks to combine the benefits of global-scale efficiencies with the benefits of local responsiveness
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Some Multinational CorporationsSome Multinational Corporations
WorkforceCompany Home
Country% SalesOutsideHomeCountry
% AssetsOutsideHomeCountry
% Foreign
Colgate-Palmolive
USA 65 47 NA
DowChemical
USA 54 45 NA
Gillette USA 68 66 NA
Honda Japan 63 36 NA
IBM USA 59 55 51
Citicorp USA 34 46 NA
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Some Multinational CorporationsSome Multinational Corporations
WorkforceCompany Home
Country% SalesOutsideHomeCountry
% AssetsOutsideHomeCountry
% Foreign
ICI Britain 78 50 NA
Nestlé Switzerland 98 95 97
Philips Netherlands 94 85 82
Siemens Germany 51 NA 38
Electronics
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Global Operations StrategiesGlobal Operations StrategiesCompany Home
Country%SalesOutsideHome
Country
% AssetsoutsideHome
Country
%ForeignWorkforce
Citicorp USA 34 46 NA
Honda Japan 63 36 NAICI Britain 78 50 NANestlé Switzerland 98 95 97PhilipsElectronics
Netherlands 94 85 82
Siemens Germany 51 NA 38
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Pontiac - the LeMans Included Pontiac - the LeMans Included the Followingthe Following
About $6,000 heads to South Korea for auto’s assembly $3,500 goes to Japan for engines, axles, and electronics $1,500 goes to Germany for design $800 goes to Taiwan, Singapore, and Japan for smaller
parts $500 heads to England for marketing $100 goes to Ireland for information technology the rest $7,600, goes to GM and its US bankers,
insurance agents, and attorneys.
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Reasons to Globalize OperationsReasons to Globalize Operations
Reduce costs (labor, taxes, tariffs, etc.) Improve the supply chain Provide better goods and services Attract new markets Learn to improve operations Attract and retain global talent
Tangible
Intangible
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Trade and TariffTrade and Tariff
Maquiladoras - Mexican factories located along the U.S.-Mexico border that receive preferential tariff treatment
GATT - an international treaty that helps promote world trade by lowering barriers to the free flow of goods across borders
NAFTA - a free trade agreement between Canada, Mexico, and the United States
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Free trade may
take us into the era of the floating factory - a six person crew will take a factory from port
to port in order to obtain the best market, material, labor and tax advantages
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Achieving Global OperationsAchieving Global Operations-Four Considerations--Four Considerations-
Global product design Global process design and technology Global factory location analysis Impact of Culture and Ethics
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Global Competitiveness of Global Competitiveness of CountriesCountries
Singapore …………………... United States ………………. Hong Kong …………………. Taiwan ………………………. Canada ………………………. Switzerland …………………. Luxembourg ……………….. United Kingdom …………... Netherlands ………………... Ireland ………………………. Australia ……………………. Finland ……………………… New Zealand ………………. Japan ……………………….. ……... Russia ……………………….
1 2 3 4 5 6 7 8 9 10 11 12 13 14….. 59
Country 1999 Ranking
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GlobalGlobal Product Design Product Design
Remember social and cultural differences packaging and marketing can help make product
seem “domestic” but - “liter” versus “quart” “sweetness” and “taste”
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GlobalGlobal Process Design and Technology Process Design and Technology
Information technology enables management of integrated, globally dispersed operation
Texas Instruments: 50 plants in 19 countries Hewlett-Packard - product development
teams in U.S., Japan, Great Britain, and Germany
Reduces time-to-market
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GlobalGlobal Facility Location Analysis Facility Location Analysis
Select CSFs based on parent organization;’s strategic or operations objectives
Obtain country-specific information on the CSFs
Evaluate each country’s CSFs using a 1 (bad) to 5 (good) rating scale
Sum the ratings
Using CSFs for Country Selection
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You May Wish To ConsiderYou May Wish To Consider
national literacy rate rate of innovation rate of technology change number of skilled workers stability of government product liability laws export restrictions similarity in language
work ethic tax rates inflation availability of raw
materials interest rates population number of miles of
highway
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CSF in Location AnalysisCSF in Location AnalysisCritical Success Factors Country
1Country
2Country
3Country
4
Technology Rate of technology change Innovations in process design
35
53
21
15
Level of education Number of skilled workers National education rate
54
41
31
42
Political and Legal Aspects Stability of government Product liability laws Export restrictions
544
533
233
551
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CSF in Location Analysis - CSF in Location Analysis - continuedcontinued
Critical Success Factors Country1
Country2
Country3
Country4
Social and Cultural Aspects Similarity in language Work ethic
54
12
53
41
Economic factors Tax rates Inflation Availability of raw materials Interest rates
3323
3544
2532
5555
Total Rating Points 50 43 35 48
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GlobalGlobalImpact of Culture and EthicsImpact of Culture and Ethics
Cultures differ! Some accept/expect: variations in punctuality long lunch hours expectation of thievery bribery little protection of intellectual property
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Ranking CorruptionRanking Corruption1. Denmark 10.02. Finland 9.63. Sweden 9.54. New Zealand 9.45. Iceland 9.3
17. United States 7.5
76. Russia 2.477. Ecuador 2.379. Columbia 2.280. Indonesia 2.085. Cameroon 1.4
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To Establish Global ServicesTo Establish Global Services
Determine if sufficient people or facilities exist to support the service
Identify foreign markets that are open - not controlled by governments
Determine what services are of most interest to foreign customers
Determine how to reach global customers
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Managing Global Service Managing Global Service OperationsOperations
Must take a different perspective on Capacity planning Location Planning Facilities design and layout Scheduling
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Some DefinitionsSome Definitions
International business A firm that engages in cross-border
transactions.
Multinational Corporation (MNC) A firm that has extensive involvement in
international business, owning or controlling facilities in more than one country
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Some Global StrategiesSome Global Strategies International Strategy: uses exports and licenses to
penetrate the global area Multidomestic Strategy: uses decentralized authority with
substantial autonomy at each business Global Strategy: Uses a high degree of centralization, with
headquarters coordinating to seek standardization and learning between plants
Transnational Strategy: Exploits economies of scale and learning, as well as pressure for responsiveness, by recognizing that core competencies reside everywhere in the organization
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Four International Operations StrategiesFour International Operations Strategies
Global Strategy
Standardized product
Economies of scale
Cross-cultural learning
Transnational Strategy
Move material, people, ideas, across national boundaries
Cross-cultural learning
International Strategy
Import.export or license existing product
Multi-domestic strategy
Use existing domestic model globally
Franchise, joint ventures, subsidiaries
Low HighLocal Responsiveness
High
Low
Cos
t Red
uctio
ns CaterpillarOtis Elevator
Coca-ColaNestlés
U.S. SteelHarley Davidson Heinz
McDonalds
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Match Product & ParentMatch Product & Parent Arrow shirts Braun Household Appliances Burger King Firestone Tires Godiva Chocolate Haagen_dazs Ice Cream Jaguar Autos MGM Movies Lamborghini Autos Goodrich Tires Alpo Petfoods
a. Volkswagen b. Bidermann International c. Bridgestone d. Campbell Soup e. Credit Lyonnais f. Ford Motor Company g. Gillette h. Grand Metropolitan i. Michelin j. Nestlé
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Match Product & CountryMatch Product & Country Arrow shirts Braun Household Appliances Burger King Firestone Tires Godiva Chocolate Haagen_Dazs Ice Cream Jaguar Autos MGM Movies Lamborghini Autos Goodrich Tires Alpo Petfoods
1. France 2. Great Britain 3. Germany 4. Japan 5. United States 6. Switzerland
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