Chapter 17 International Operations Management International Business 4

Chapter 17: International Operations Management International Business, 4 th Edition Griffin & Pustay 17 -1 © 2004 Prentice Hall

Chapter Objectives_1 § Describe the nature of international operations management § Analyze the supply chain management and vertical integration decisions facing international production managers § Analyze the meaning of productivity and discuss how international firms work to improve it 2 © 2004 Prentice Hall

Chapter Objectives_2 § Explain how firms control quality and discuss total quality management in international business § Analyze how international firms control the information their managers need to make effective decisions 3 © 2004 Prentice Hall

International Operations Management § Operations Management: the set of activities an organization uses to transform different kinds of inputs into final goods and services § International Operations Management: the transformation-related activities of an international firm 4 © 2004 Prentice Hall

Figure 17. 1 The International Operations Management Process Strategic Context • Differentiation • Cost leadership • Focus Standardized vs. Customized Production Acquisition of Resources • Supply Chain • Management • Vertical Integration • Make-or-buy decision 5 Location Decisions • Country-related issues • Product-related issues • Government policies • Organizational issues Logistics and Materials Management • Flow of materials • Transportation options • Inventory levels • Packaging © 2004 Prentice Hall

Complexities of International Operations Management § Resources § Location § Logistics 6 © 2004 Prentice Hall

Production Management § Supply chain management: set of processes and steps a firm uses to acquire the various resources it needs to create its products § Vertical integration: extent to which a firm either provides its own resources or obtains them from other sources 7 © 2004 Prentice Hall

Figure 17. 2 Basic Make-or-Buy Options 8 © 2004 Prentice Hall

Influence Factors for the Make-or-Buy Decision § Size § Scope of operations § Technological expertise § Nature of product 9 © 2004 Prentice Hall

High Strategic Control Moderate Control Low Potential for Competitive Advantage Figure 17. 3 Competitive Advantage versus Strategic Vulnerability in the Make-or-Buy Decisions High Low Degree of Strategic Vulnerability 10 © 2004 Prentice Hall

Necessary Trade-offs in Make-or-Buy Decision § Cost § Control § Risk § Investment § Flexibility 11 © 2004 Prentice Hall

Factors affecting Location Decisions § Country-Related Issues § Product-Related Issues § Government Policies § Organizational Issues 12 © 2004 Prentice Hall

Country-Related Issues § Resource availability § Cost § Infrastructure § Country-of-origin effects 13 © 2004 Prentice Hall

Country-related issues play key roles in location decisions for manufacturers 14 © 2004 Prentice Hall

Product-Related Issues § Value-to-weight ratio § Technology § Importance of customer feedback 15 © 2004 Prentice Hall

Government Policies § Stability of political process § National trade policies § Economic development incentives § Existence of foreign trade zones (FTZ) 16 © 2004 Prentice Hall

Organizational Issues § Business strategy – Cost leadership – Differentiation § Organizational structure § Inventory management policies – Just-in-time (JIT) inventory management system 17 © 2004 Prentice Hall

International Logistics and Materials Management § International logistics: management of the – flow of materials, parts, supplies, and other resource from suppliers to the firm – flow of materials, parts, supplies, and other resources within and between units of the firm itself – flow of finished products, services, goods from the firm to customers 18 © 2004 Prentice Hall

Differences in Domestic and International Materials Management § Distance involved in shipping § Number of transport modes § Complexity of regulatory context 19 © 2004 Prentice Hall

International Service Operations § International Service Business: firm that transforms resources into an intangible output that creates utility for its customers § Characteristics: – Intangible – Not storable – Require customer participation – Tied to the purchase of other products 20 © 2004 Prentice Hall

This BP Connect store allows customers to buy BP petroleum products, coffees from South America, and to access the Internet from the pump 21 © 2004 Prentice Hall

Productivity § Economic measure of efficiency that summarizes the value of outputs relative to the value of inputs used to create the outputs – Helps to determine firm’s overall success – Contributes to long-term survival – Contributes to overall standard of living 22 © 2004 Prentice Hall

Strategies for Enhancing Productivity § Spend more on research and development § Improve operations § Increase employee involvement 23 © 2004 Prentice Hall

Managing Quality in International Business § Quality: totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs – American Society for Quality Control § ISO 9000: 2000 – International set of quality guidelines – Basis for quality certification – International Organization for Standardization 24 © 2004 Prentice Hall

Figure 17. 4 The Essential Components of Total Quality Management Strategic Commitment To Quality Employee High Quality Up-to-Date Involvement Materials Technology 25 Effective Methods © 2004 Prentice Hall

Total Quality Management § TQM: Integrated effort to systematically and continuously improve the quality of an organization’s products and/or services § Statistical process control: family of mathematically based tools for monitoring and controlling quality § Benchmarking: process of legally and ethically studying how other firms do something in a highquality way and then either imitating or improving on their methods 26 © 2004 Prentice Hall