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IONA College Operations Management MBA-540Jerry Fjermestad


Operations ManagementOperations in a Global Environment Chapter 33-2

Outline Global Company Profile: Boeing Why Global Operations are Important Achieving Global OperationsGlobal Product Design Global Process Design and Technology Global Facility Location Impact of Culture and Ethics

Global Issues in Service Operations


Outline - continued Global Issues in Service Operations

Managing Global Service Operations

Global Operations Strategies

International Strategy Multi-domestic Strategy Global Strategy Transnational Strategy


Learning ObjectivesWhen 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


Learning Objectives continuedWhen 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


Boeing Suppliers (777)FirmAlenia AeroSpace Technologies CASA Fuji

CountryItaly Australia Spain Japan

PartsWing flaps Rudder Ailerons Landing gear doors, wing section Flight computers Flap supports Landing gears Landing gear doors Landing gear doors

GEC Avionics United Kingdom Korean Air Korea MenascoAerospace Canada Short Brothers Singapore Aerospace Ireland Singapore3-7

Examples 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 quality3-8

Management Issues in Global OperationsGlobal Strategic Context

Differentiation Cost leadership Response

Supply Chain Manageme nt

Location Decisions

Logistics Managem ent


Supply-Chain Management Sourcing Vertical integration Make-or-buy decisions Partnering


Location Decisions Country-related issues Product-related issues Government policy/political risk Organizational issues


Materials Management Flow of materials Transportation options and speed Inventory levels Packaging Storage


Defining 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 responsiveness3-13

Some Multinational CorporationsCompany Home % Sales% Assets% Foreign Country Outside Outside Workforce Home HomeCountry Country 34 65 54 68 63 593-14



46 47 45 66 36 55


ColgateUSA Palmolive Dow Chemical Gillette Honda IBM USA USA Japan USA

Some Multinational CorporationsCompany Home % Sales% Assets% Foreign Country Outside Outside Workforce Home Home CountryCountryICI Nestl Britain 78 50 95 85 NA NA 97 82 38

Switzerland 98

Philips Netherlands94 Electronics Siemens Germany 51


Global Operations StrategiesCom pany Hom e CountryUSA


% Sales Outside Hom e Country34 63 78 98 94 513-16

%Assets % Foreign outside W orkforce Hom e Country46 36 50 95 85 NA NA NA NA 97 82 38

Honda J apan ICI Britain Nestl Sw itzerland Philips Netherlands Electronics Siem ens Germ any

Pontiac - the LeMans Included the Following About $6,000 heads to South Korea for autos 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.


Reasons to Globalize OperationsTangible 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


Trade 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


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


Achieving Global Operations -Four Considerations Global product design Global process design and technology Global factory location analysis Impact of Culture and Ethics


Global Competitiveness of CountriesCountry 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

1999 Ranking


Global Product Design Remember social and cultural differences

packaging and marketing can help make product seem domestic but liter

versus quart sweetness and taste


Global 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-market3-24

Global Facility Location AnalysisUsing CSFs for Country Selection Select CSFs based on parentorganization;s strategic or operations objectives Obtain country-specific information on the CSFs Evaluate each countrys CSFs using a 1 (bad) to 5 (good) rating scale Sum the ratings3-25

You 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 highway3-26

Crit l Su ss Fa ors ica cce ctTechnology

CSF in Location Analysis3 5 5 4 5 4 4 5 3 4 1 5 3 3

Cou t Cou t Cou t Cou t n ry n ry n ry n ry 1 2 3 4 2 1 3 1 2 3 3 1 5 4 2 5 5 1

Ra eof t ch olog ch n e t e n y ag In ova ion inp n t s roce d sig ss e n N m e of sk dw e u br ille ork rs N t a e u t ra e a ion l d ca ion t St b y of g rn e t a ilit ove m n Prod ctlia ilityla s u b w Exp re riction ort st s

Level of education

Political and Legal Aspects


Crit l Su ss Fa ors ica cce ctSocial and Cultural Aspects Econom factors icSim rit inla g a e ila y nug W eh ork t ic

CSF in Location Analysis - continued5 4 3 3 2 3 5 03-28

Cou t Cou t Cou t Cou t n ry n ry n ry n ry 1 2 3 4 1 2 3 5 4 4 4 3 5 3 2 5 3 2 3 5 4 1 5 5 5 5 4 8

Ta ra e x ts In t fla ion Av ila ilit of ra m t ria a b y w a e ls In e stra s t re te

Total Rating Points

Global Impact of Culture and Ethics Cultures differ! Some accept/expect:

variations in punctuality long lunch hours expectation of thievery bribery little protection of intellectual property3-29

Ranking Corruption1. 2. 3. 4. 5. Denmark 10.0 Finland 9.6 Sweden 9.5 New Zealand Iceland 9.3 9.4 7.5

17. United States 76. 77. 79. 80. 85. Russia 2.4 Ecuador Columbia Indonesia Cameroon 2.3 2.2 2.0 1.43-30

To 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


Managing Global Service OperationsMust take a different perspective on Capacity planning Location Planning Facilities design and layout Scheduling


Some Definitions International business

A firm that engages in crossborder transactions.

Multinational Corporation (MNC)

A firm that has extensive involvement in international business, owning or controlling facilities in more than one country3-33

Some 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


Four International Operations Strategies HighCost ReductionsGlobal Strategy Standardized product Economies of scale Cross-cultural learning Caterpillar Otis Elevator International Strategy Import.export or license existing U.S. Steel product Harley Davidson Low

Transnational Strategy Move mat


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