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©2004 Prentice Hall17-1
Chapter 17:InternationalOperations Management
International Business, 4th Edition
Griffin & Pustay
©2004 Prentice Hall17-2
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
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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
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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
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Figure 17.1 The International Operations Management Process
Strategic Context•Differentiation•Cost leadership•Focus
Standardized vs. CustomizedProduction
Acquisition of Resources•Supply Chain •Management•Vertical Integration•Make-or-buy decision
Location Decisions•Country-related issues•Product-related issues•Government policies•Organizational issues
Logistics and Materials Management•Flow of materials•Transportation options•Inventory levels•Packaging
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Complexities of International Operations Management
Resources Location Logistics
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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
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Influence Factors for the Make-or-Buy Decision
Size Scope of operations Technological expertise Nature of product
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Figure 17.3 Competitive Advantage versus Strategic Vulnerability in the Make-or-Buy Decisions
StrategicControl
ModerateControl
LowControl
High LowDegree of Strategic Vulnerability
Low
Hig
h
Pote
ntia
l for
Com
peti
tive
A
dvan
tage
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Necessary Trade-offs in Make-or-Buy Decision
Cost Control Risk Investment Flexibility
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Factors affecting Location Decisions
Country-Related Issues Product-Related Issues Government Policies Organizational Issues
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Country-Related Issues
Resource availability Cost Infrastructure Country-of-origin effects
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Country-related issues play key roles in location decisions for manufacturers
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Product-Related Issues
Value-to-weight ratio Technology Importance of customer feedback
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Government Policies
Stability of political process National trade policies Economic development incentives Existence of foreign trade zones (FTZ)
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Organizational Issues
Business strategy– Cost leadership– Differentiation
Organizational structure Inventory management policies
– Just-in-time (JIT) inventory management system
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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
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Differences in Domestic and International Materials Management
Distance involved in shipping Number of transport modes Complexity of regulatory context
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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
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This BP Connect store allows customers to buy BP petroleum products, coffees from South America,
and to access the Internet from the pump
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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
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Strategies for Enhancing Productivity
Spend more on research and development
Improve operations Increase employee involvement
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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
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Figure 17.4 The Essential Components of Total Quality Management
Strategic Commitment To Quality
EmployeeInvolvement
High QualityMaterials
Up-to-DateTechnology
Effective Methods
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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 high-quality way and then either imitating or improving on their methods