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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