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intern
ation
al bu
siness, 5
th edition
chapter 17international operations management
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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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Operations Management
Operations management is the set of activities an organization uses to transform different kinds of inputs (materials, labor, and so on) into final goods and services.
International operations management refers to the transformation-related activities of an international firm.
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Figure 17.1 The International Operations Management Process
Strategic context
Production
Acquisitionof resources
Location decisions
Logistics
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Complexities of International Operations Management
Resources
LogisticsLocation
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Forms of Operations Management
Productionmanagement
Service operations
management
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Supply Chain Management
Supply chain management is the set of processes and steps a firm uses to acquire the
various resources it needs to create its products.
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Figure 17.2 Basic Make-or-Buy Options
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Influence Factors for the Make-or-Buy Decision
Size Scope of operations
Technologicalexpertise
Nature of product
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Figure 17.3 Competitive Advantage versus Strategic Vulnerability
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Necessary Trade-Offs in the Make-or-Buy Decision
Trade-offs
Control
Risk
Investment
CostFlexibility
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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
Infrastructure
Country-of-origin effects
Cost
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Country-Related Issues
Such issues play key roles in location decisions for manufacturers.
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Product-Related Issues
Value-to-weightratio
Required productiontechnology
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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
Inventory managementpolicies
Organizationalstructure
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International Logistics
International logistics is the management of the flow of materials, parts, supplies,
and other resources from suppliers to the firm; the flow of materials, parts,
supplies, and other resources within and between units of the firm itself; and the flow of finished products, services, and goods from the firm to customers.
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Factors Distinguishing International and Domestic Logistics
Transportdistance
Complexity ofregulatory content
Number of transport modes
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Characteristics of International Services
• Services are intangible
• Services are not storable
• Services may require customer participation
• Services may be tied to the purchase of other products
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Managing Service Operations
Capacity planning
Location planning
Facilities design and layout
Operations scheduling
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Productivity
Productivity is an economic measure
of efficiency that summarizes the value of outputs relative to the value
of the inputs used to create the outputs.
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Strategies for Enhancing Productivity
• Spend more on R&D
• Improve operations
• Increase employee involvement
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International Organization for Standardization
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Figure 17.4 Essential Components of Total Quality Management
Strategic Commitment to Quality
EmployeeInvolvement
High-QualityMaterials
Up-to-DateTechnology
Effective Methods
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Key Components of Total Quality Management
Statisticalprocesscontrol
Benchmarking