IONA College Operations Management MBA-540

Jerry Fjermestad

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Operations Management
Operations in a Global Environment Chapter 3
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Outline
Global Company Profile: Boeing Why Global Operations are Important Achieving Global Operations
Global Product Design Global Process Design and Technology Global Facility Location Impact of Culture and Ethics

Global Issues in Service Operations

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Outline - continued
Global Issues in Service Operations

Managing Global Service Operations

Global Operations Strategies

International Strategy Multi-domestic Strategy Global Strategy Transnational Strategy

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Learning Objectives
When 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

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Learning Objectives - continued

When 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

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Boeing Suppliers (777)

Firm
Alenia AeroSpace Technologies CASA Fuji

Country
Italy Australia Spain Japan

Parts
Wing 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 Menasco Aerospace Canada Short Brothers Singapore Aerospace Ireland Singapore
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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 quality
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Management Issues in Global Operations

Global Strategic Context
Differentiation Cost leadership Response

Supply Chain Management

Location Decisions

Logistics Management

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

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

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

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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 responsiveness
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Some Multinational Corporations

Company Home Country
USA USA USA USA Japan USA

% Sales Outside Home

Country 34 65 54 68 63 59
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% Assets Outside Home

Country 46 47 45 66 36 55

% Foreign Workforce
NA NA NA NA NA 51

Citicorp ColgatePalmolive Dow Chemical Gillette Honda IBM

Some Multinational Corporations

Company Home Country % Sales Outside Home Country
78 98

% Assets Outside Home Country

50 95

% Foreign Workforce

ICI Nestl

Britain Switzerland

NA 97

Philips Electronics Siemens

Netherlands
Germany

94
51

85
NA

82
38

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Global Operations Strategies

Company Home Country
USA

Citicorp

%Sales % Assets %Foreign Outside outside Workforce Home Home Country Country
34 63 78 98 94 51
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46 36 50 95 85

NA NA NA 97 82 38

Honda Japan ICI Britain Nestl Switzerland Philips Netherlands Electronics Siemens Germany

NA

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.
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Reasons to Globalize Operations

Tangible

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
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Intangible

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
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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

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

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Global Competitiveness of Countries

Country 1999 Ranking Singapore ... 1 United States . 2 Hong Kong . 3 Taiwan . 4 Canada . 5 Switzerland . 6 Luxembourg .. 7 United Kingdom ... 8 Netherlands ... 9 Ireland . 10 Australia . 11 Finland 12 New Zealand . 13 Japan .. 14 ... .. Russia . 59
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Global Product Design

Remember social and cultural differences

packaging and marketing can help make product seem domestic but liter versus quart

sweetness and taste

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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-market

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Global Facility Location Analysis

Using CSFs for Country Selection
Select CSFs based on parent organization;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 ratings
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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
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work ethic tax rates inflation availability of raw materials interest rates population number of miles of highway

CSF in Location Analysis

Critical Success Factors
Technology
Rate of technology change Innovations in process design Number of skilled workers National education rate Stability of government Product liability laws Export restrictions Country Country Country Country 1 2 3 4 3 5 5 4 5 4 4 5 3 4 1 5 3 3 2 1 3 1 2 3 3 1 5 4 2 5 5 1

Level of education

Political and Legal Aspects

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CSF in Location Analysis continued

Critical Success Factors
Social and Cultural Aspects
Similarity in language Work ethic Country Country Country Country 1 2 3 4 5 4 3 3 2 3 50
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1 2 3 5 4 4 43

5 3 2 5 3 2 35

4 1 5 5 5 5 48

Economic factors

Tax rates Inflation Availability of raw materials Interest rates

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 property

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Ranking Corruption
1. 2. 3. 4. 5. Denmark Finland Sweden New Zealand Iceland 10.0 9.6 9.5 9.4 9.3 7.5 2.4 2.3 2.2 2.0 1.4
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17. United States 76. Russia 77. Ecuador 79. Columbia 80. Indonesia 85. Cameroon

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
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Managing Global Service Operations

Must take a different perspective on Capacity planning Location Planning Facilities design and layout Scheduling

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Some Definitions
International business

A firm that engages in cross-border transactions. A firm that has extensive involvement in international business, owning or controlling facilities in more than one country
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Multinational Corporation (MNC)

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
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Four International Operations Strategies

High Global Strategy Standardized product Economies of scale Cross-cultural learning Caterpillar Otis Elevator International Strategy Import.export or license existing product U.S. Steel Harley Davidson Low Transnational Strategy Move material, people, ideas, across national boundaries Cross-cultural learning Coca-Cola Nestls

Cost Reductions

Low

Multi-domestic strategy Use existing domestic model globally Franchise, joint ventures, subsidiaries Heinz McDonalds High Local Responsiveness
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Match Product & Parent

Arrow shirts Braun Household Appliances Burger King Firestone Tires Godiva Chocolate Haagen_dazs Ice Cream Jaguar Autos MGM Movies Lamborghini Autos Goodrich Tires Alpo Petfoods a. Volkswagen b. Bidermann International c. Bridgestone d. Campbell Soup e. Credit Lyonnais f. Ford Motor Company g. Gillette h. Grand Metropolitan i. Michelin j. Nestl

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Match Product & Country

Arrow shirts Braun Household Appliances Burger King Firestone Tires Godiva Chocolate Haagen_Dazs Ice Cream Jaguar Autos MGM Movies Lamborghini Autos Goodrich Tires Alpo Petfoods 1. France 2. Great Britain 3. Germany 4. Japan 5. United States 6. Switzerland

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