operations in global business strategy

8/6/2019 Operations in Global Business Strategy

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Operations in Global

Business Strategy


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Strategic changes required byGlobalisation

Compete in several dimensions More opportunities in multiple

countries


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Actions-Multinational

Global Sources of competitiveadvantage

Improving performance inresponse to competition

Stimulus for improvement

Sourcing sophisticated productsand services

Specialized knowledge and localexperience

Sourcing Commodities

Sourcing Commodities Specialized natural and labor resources

Supply from many operationslocal to customers

Supply from many operations localto customers

Scope and proximity

Supply from concentrated

locationsDistant from customer

Supply from concentratedlocationsDistant from customer

Scale and scope economies

N/w Supplying customers Synergies through network for learning

International pricing and entry inresponse to competition

Strategic response to competition


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Configuration

Simple global exports

Single one country International sourcing

customer

s

Suppliers

Geographicallydispersed

Geographica lly

concentrated

Multination

al

Geographica lly

concentrated

Geographicallydispersed


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Global sourcing is a term used todescribe practice of sourcing fromthe global market for goods and

services across geopoliticalboundaries. Global sourcing often aims to exploit

global efficiencies in the delivery of

a product or service. These efficiencies include low cost

skilled labor, low cost raw materialand other economic factors like taxbreaks and low trade tariffs.


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Configuration andcoordination

HQ

Local Oper

Customers

Flow and influence of resources

Flow of knowledge Flow of product


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New at Hyde Tools: globalsourcing strategy

http://www.homechannelnews.com/story.aspx?id=159091&menuid=267 (Dec. 9) South bridge, Mass.-based Hyde Tools said its pursuit of "right priced , quality, stainlesssteel products" has led it to partnerships with product development firm Proteus Design and

two Chinese manufacturers. The announcement came as Hyde Tools , which has in the pastpromoted itself as a "Made in the USA" leader of surface preparation tools, is introducingthree new lines of putty knives and scrapers: "Pro Stainless," "Pro Project" and "ValueSeries."

"Everyone knows in order to supply these price points to meet the profit demands of our partners,we must product at the best costs available in the global marketplace," wrote Corey Talbot,VP of marketing and product development, in a letter

Hyde has entered into two joint product development agreements and manufacturing contractswith two Chinese manufacturers. The company described each as having more than 20years experience in tool production. Proteus Design has worked in product development withclients including 3M, Gillette and Kohler.

Talbot described the move as part of a new chapter for Hyde, in which it will strive to be "TotalCategory Leader" -- which Hyde believes it has achieved to a large extent. The company'snew brochure for the its new lines of scrapers: "New tools, and better margins for our retailpartners."

The company also shared research on the putty knife and scraper market. It estimates the NorthAmerican market for this product category is about 28.8 million units sold per year. Thecompany's research also shows the vast majority (89%) of professional users are willing topay more for a stainless steel putty knife or scraper than for a standard carbon putty knife.

According to a Hyde spokeswoman, the company continues to manufacturer a significant amountof products in the United States. For instance, their Black & Silver line of tools are made inSouthbridge, US. But, like most manufacturers, it has been sourcing globally for years. Thecompany hasn't promoted itself as exclusively "made in America" in about 10 years.
http://www.homechannelnews.com/story.aspx?id=159091&menuid=267http://www.homechannelnews.com/story.aspx?id=159091&menuid=267http://www.hydetools.com/http://www.hydetools.com/http://www.hydetools.com/http://www.homechannelnews.com/story.aspx?id=159091&menuid=267


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Global Delivery Model involves thedeployment of resources from different

parts of the world to provide maximally efficient service delivery.

Global Delivery Model involves having theright volume of skills and the right skillsmix in the right place at the right timeand the right price point.

Global Delivery Model gives the advantage

of delivery centers located around theglobe as well as a team working close tothe business using consistent processes.

Most businesses have now come to expect Global Delivery to be an integral component of the solution offered by theservice provider.


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Evolution of the Global Delivery Model

Simplification

Standardization

SharedServices Outsourcing

Offshore

ocalegionalaximum

Lev

el

of

Benefit

Minimum

GLOBAL

REGIONAL

LOCAL

ha timprovements

an be made by mplementing

local e st p ra ct ic e?

a n b en ef it sofstandardizatio

across u si ne ss es a nd

e og ra ph y b eachieved?

an sharedserviceeconomies

f scale becaptured?

soutsourcing

,easible eneficial

n d o ut we ig hs

dditionalrisk?

ource rom ffshore

-ocation( aptive

)r vendor

lobalDelivery

ou rce fr om ultiple /ocat ions vendo

s across theglobe

< -- -- --- -- --- - - --- -- --- -ct Global

>


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11

Drivers for Global Delivery

Adoption of the Global Delivery Model creates competitive advantages that enablesbusinesses to fundamentally manage cost, focus on core competencies, improveservices quality, enhance flexibility, and react quickly to market change.

C

I

S/

Q

F/i

g

,

G

A

S

Se

S

N

O

P

P

L


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Advantages of global sourcing, beyond low cost, include: learning how to do business in a potential market tapping into skills or resources unavailable

domestically

developing alternate supplier/vendor sources tostimulate competition, and increasing total supplycapacity.

Disadvantages of global sourcing can include: hidden costs associated with different cultures and

time zones, exposure to financial and political risks in countries

with (often) emerging economies, increased risk of the loss of intellectual property, and

increased monitoring costs relative to domesticsupply.

For manufactured goods, some key disadvantagesinclude lon lead times the risk of ort shutdowns


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Offshoring

O ffsh o rin g is d e fin e d a s th e m o ve m e n t o f a b u sin e ss p ro ce ss

d on e a t a co m p a n y in o n e cou n try to th e sa m e o r a n o th e r com p a n y in

,a n o th e r d iffe re n t co u n try

A com p a n y m o vin g a n in te rn a l b u sin e ss u n it from o n e cou n try to

a n o th e r w o u ld b e o ffsh o rin g o r,p h ysica l re stru ctu rin g b u t n o t

.ou tsou rcin g


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INTRODUCTION:Outsourcing

Outsourcing denotes the

continuous procurement of services from a third party,making use of highly integratedprocesses, organization models

and information systems.

O U TSO U RC ERC O M PA N YServices

OrganizationLevel

Agreement

ServiceLevel

Agreement


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Why do outsourcing?

A cce ss b e st in cla ss b u sin e ss p rocesse s H arn ess le ad in g

tech n o log ie s

In cre ase e fficien cie s

E n h an ce ca p ab ilitie s

E xp an d service

Free u p m an ag e m e n t tim e

D ecrea se o p e ra tin g co sts

Acquire new skillAcquire Better mgtFocus on StrategyFocus on core functionAvoid major investmentsAssist a fast growth situation

Handle overflow situationImprove flexibilityEnhance credibilityJump on Bandwagon


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OBJECTIVES

Ensure highest level of productivity for the

corporation Bring greatest value to the

end consumer


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INTRODUCTIONOn the origins of Outsourcing

1776 Adam Smith's Wealth of Nationspropagates competitive advantagethrough outsourcing. Term

"outsourcing" itself was not in use. 18th and 19th centuries : floatingfactory ships, the concept of "offshoremanufacturing gets a boost Early

20th century Companies like FordMotors own everything, even foreststo make rubber for car tyres! GeneralMotors runs a 2000 people HR andtravel desk to cater to its employee


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1940s ADP(Automatic Data Processing) Incstarts with handling payroll outsidecompanies. Today the $8 billion, 41000employee payroll expert handles payrolls

for one in six US workers and recentlyopened office in India.1960s Hundreds of call centers spring up in

the US and UK. Convergys, the largest callcentre company started as a captive unitof Cincinnati Bell. Hived off in the late1990s.

1970 s US companies from oil majors,telecom operators, pharmacy firms toFMCG firms outsource customer care,telemarketing, payroll and other functions.


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1980- 1990 US and European companiesstart shifting work to Ireland, Israel andCanada. Ireland particularly benefits ascosts are lower and it offers multi

language capability. At their peak theover 100 call centers in Ireland employover 300,000 staff

1990-1999 C. K. Prahalad's corecompetency theory expounded in aHarvard Business School paper. Thebasic lessons of the theory - identifyyour core competencies, focus on themand get out of everything else .American Express, Swissair, BritishAirways and General Electric(GE) start


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1999 The New Telecom Policy of 1999 endedthe state monopoly on international callingfacilities. Though outsourcing of businessprocesses like data processing, billing, andcustomer support began towards the endof the 1990s when MNCs establishedwholly owned subsidiaries.

2000 Third Party players spring up in India.

By 2005 end, over 300 open shop in Indiaand beyond. Some of them even set upoperations outside. About 45 globaldestinations BPOs bandwagon and arenow competing to get a slice of the annual$300 billion outsourcing pie


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INTRODUCTION Types of Outsourcing

Businessprocesses

Application Development

and Maintenance

-ITinfrastructure

:BPO Business Process Outsourcing

:ASP Application Service Provider

:DBRO , , &Design Build Run Operate

:ADM . &Application Develop Maintenance

:ITO &IT Infrastructure service

hosting Outsourcing

Administrativeprocesses

:APO Administrative Process Outsourcing

:Outsourcing models

BPO

AMO

SDO


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Information Technology Outsourcing (ITO) The delegation of a significant portion of acompanys IT operations

Business Process Outsourcing (BPO) The delegation of a significant portion of acompanys back office and technology-enabledoperations. BPO is often an updated, re-incarnationof business process reengineering.

Application Development & MaintenanceOutsourcing (ADM) The delegation of a significant portion of acompanys Application Development andMaintenance work


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BPO Levels

D e g re e o f in d u stria liza tio nmedium highlow

Customized Industrialized

Single service delivered to

multiple clientssimultaneously

payments processors such as

First Data

Similar services delivered to

multiple clients payroll providers

such as ADP and

;Paychex Navitaire

Custom designed services leveraging

-know how ;IBM AFS client site operations

- - One to one - -

One to many


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AMO


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Accenture provides a flexible spectrum of services andarrangementsfrom simple to complete end-to-end ITresponsibilityand from immediate to well into thefuture.

Starting with a standard approach, we build on the basicsand structure our projects to achieve specific businessresults for our clients, carefully considering their sizeand complexity.

the extent of our collaboration through two dimensions:1: Scope of ServicesCompanies can select basic application management services

(such as break/fix support) or broaden the responsibility toinclude application enhancements, upgrades orcomprehensive application development. Over the courseof time, Accenture will adjust service levels to meet theclients changing business needs.

2: Breadth of ApplicationsOutsourcing arrangements can specify a single critical

application, a group of related applications, or an entireportfolio of software applications. Accenture will managecustom or packaged software, including enterprisesolutions such as SAP, Oracle, PeopleSoft and Siebel.

Accentures Application Outsourcing services are tailoredto our clients needs. Our flexibility is demonstrated bythe fact that we manage hundreds of arrangements thatinvolve less than 100 peopleand many with more than1,000 people.

INTRODUCTION


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INTRODUCTIONSDO Service Delivery

Outsourcing Security- End-to-end security

services includingfirewall management,intrusion detection,identity managementand security policy

Data Centers- Remote and on-sitemanaged server hosting

- Data centers

Technical Support- Help desk, desk-side and

self-service support- Global hubs

Network Services- Managing data and voicenetworks

-Desktop Management and Mobility

- PC, laptop, hand-held,distributed

Supplier Management- Identifying, qualifying,

contracting and managingstrategic suppliers

Services

DataCenters

Desktop.Mgmt

&Mobility

Technical Support

NetworkServices

Security Supplier.Mgmt

Client Operations Management

&Messaging Collaboration

Technical Support

&Desktop Management Mobility

Network Management

Hosting

Sales Support and Mobilization

Security Operations

Deliveryapabilities


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INTRODUCTIONSourcing of Outsourcing

Off-Site Local service providers Near Shore Proximity cross-border

service providers Off-Shore Remote Cross-border

service providers


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RUNNING OUTSOURCINGFramework

D elive ry M o d e lis b a sed o n severalkey com po ne nts

&C om m on o bjectives go als

- -End to End governance

stru cture -M u lti leve ltea m o rg an isation

Leve rag ed core com pe ten cies an d sk ills

, ,Form a lised S LA s O LA s

Fo ru m fo r en g ag in g m u ltip le sou rce s in th e ke y p roce sses

,of com m u n icatio n co ord in a tion an d in teg ra tion

O p tim ize g lob al re sou rce s

E n co u rag e co llab ora tivew orkin g

Lev erag e tech no log y to e n ab le b u sin ess stra te g y

E stab lish es a sin g le p o in t o f re sp on sib ility fo r e n tire.re la tion sh ip

K ey P rin cip le s

Client Outsourcingcompany Skill Pool Technical

Support+

-OFF SHORE

-NEAR SHORE

LOCAL

P r o

j e c

t s

Re

p o r

t i n g

S t a

t u s

T r a c

k i n

g

&Common Objectives Goals

,

,

M e

t h

o d

s

S t a

n d

a r

d s

a n

d

T o o l s

C o m m o n

P r o c e s

s e s

C o n t r a c

t

Governance


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Verticals in India


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Levels of Outsourcing: Tactical,Strategic & Transformational

Tactical Specific problem of firm Troubles like : lack of finances,

inadequate internal managerialcompetencies, talent crunch, desire toreduce headcount

Done for corporate restructuring

Benefits: Generate immediate costsavings, eliminate need for futureinvestments, realize cash infusion fromsale of assets, relieve burden of

staffing


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Strategic Outsourcing

Building long term values Get the job done in a strategic model Managerial mindset matured for

relationships From buyer & supplier to business

partners


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Transformationaloutsourcing

3 rd generation outsourcing Redefining the business Transform themselves and their

markets Innovations that outside that

specialist bring to customer sbusiness


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Transformational vs Traditional

Business focus Centered on creating

value Assist in managing

uncertainty

Harmonize with strategicgoal

Based on fashioning an/w of partnership inthe connected global

economy Business cost and

reengineeringfacilitate perpetualvalue creation

Operational focus Centered on cutting cost Assist in establishing

control Aligns with basically

unchanged businessprocess

Based on externalspecialists realizinghigher performance

for the client thaninternal non specialistresource

Remove noncorefunctions from the

business to provide aone time discharge of


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Decision making for

Outsourcing

Monitoring the evolving


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Monitoring the evolvingoutsourcing environment

Conflicting information surfaces To make effective decision about a

process

Tremendous growth & wide range of services makes it complex---------------

To match specific needs one must meetcorrect services with correct supplier

------------------Outsourcing vs supplier relationshipOutsourcing vs consulting


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Identifying Companiesoutsourcing needs

Address the strategic interest andgoals of the company

Specify the service to be providedand identify the reason to consideroutsourcing

Place the decision in a neutralframework


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Decision making foundation

Set strategic direction Identify companys core

competencies Develop a list of supplier /vendors for

consideration Appoint an outsourcing process

implementation & governanceteam


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Primary considerations

Strategically enhance corecompetency

Addressing issues with employee,union and community

Finding lowest cost for best value Recognizing impact on internal

operations


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What's driving youroutsourcing decision

Accelerate reengineering benefits Gain access to world class technology Release resources for other purposes

Reevaluate problematic functions Improve company focus Make capital fund available Lowering operating cost Minimizing risk Gain access to resources not available

internally


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Problems

Unclear expectations regardingoutsourcing initiative

Lack of outsourcing projectunderstanding

Inaccurate analysis for cost benefitand internal external resources

Hard to quantify soft cost and benefit


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Competitive labor markets

High cost labor US,UK,Canada,Singapore,Ireland,Aust

ralia

Low cost labor Low quality workforce, education,

technology Philippines

Hungary Mexico & Chile

High quality workforce, educationechnology

India, Eastern Europe &China

h f


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Getting to the core of outsourcing

Rule of thumb: Do not launchoutsourcing process with functionsthat are core to it(CORECOMPETENCIES)

Sr mgt commit to concept Mgt reserve special time to ensure

smooth transition Training Flexibility


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Key Questions

Preprocessquestions:

Symptoms causing

to consideroutsourcing? Key cause &

constraints? Business objectives

and benefits of outsourcing?

Big Pticture?

Cost,Quality &TimeQuestions:

Reduce cost long

short term? Build vs buy ROI? Feasibility?

Strategy Questions


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Foundations

Getting started-which process to beoutsourced

Shared vision Establish effective Performance measures Clear communication mechanism Expect the unexpected

l


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Turning vision to reality

Hands on approach Clearly communicate vendor

expectation Ensure end to end business delivery Empower outsourcing governance

team Seek quick win Account for geographic , cultural &

time difference


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Performance due diligence Define service level requirement Conduct benchmark audits

I l i i


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Implementing strategicsourcing

Strategic sourcing: Dynamic delivery of internal & external business orientedresources and services to ensure

business objectives are met 3 lessons:

Most outsources services are notcommodity services

Some functions are best performed inhouse to retain competitive advantage

Outsourcing relationships must beflexible and evolve with companysbusiness


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Strategic sourcing start ups

Assess internal capability Research the market Shop solution Model governance


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CONTROL

CRO Clearly state your companys objectives Understand service providers goal

Understand the nature of the deal Practice problem prevention Articulate roles and responsibility of both

the parties

Set up effective service level mgt program Launch communication program that

includes your company ,your serviceprovider and your user base


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PAPER WORK INVOLVED

Charter Cost Benefit Analysis Assumptions &

Constraints Project scope

statement Critical success

factors

Communication plan Work breakdownstructure

Role & responsibilitymatrix

Resource plan Procurement plan Risk management

plan Quality plan Project schedule Budget Change

Management Implementation

checklist Feedback


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Lost control

Process costly to bring back Inevitable changes costly Cut in staff damage morale

Time to manage the contract make itmore expensive Product quality degraded due to

lowering cost philosophy

Many clients with service provider ;notup to expectation Public response to layoffs

operations in global business strategy

Documents