Chapter 17: International Operations Management

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

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 ©2004 Prentice Hall

3. 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 ©2004 Prentice Hall

4. 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 ©2004 Prentice Hall

5. 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 • 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

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

7. 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 ©2004 Prentice Hall

8. Figure 17.2 Basic Make-or-Buy Options ©2004 Prentice Hall

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

10. Strategic Control Moderate Control Low Control Figure 17.3 Competitive Advantage versus Strategic Vulnerability in the Make-or-Buy Decisions Potential for Competitive Advantage Low High High Low Degree of Strategic Vulnerability ©2004 Prentice Hall

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

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

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

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

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

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

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

18. 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 ©2004 Prentice Hall

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

20. 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 ©2004 Prentice Hall

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

22. 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 ©2004 Prentice Hall

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

24. 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 ©2004 Prentice Hall

25. Figure 17.4 The Essential Components of Total Quality Management Strategic Commitment To Quality Employee Involvement High Quality Materials Up-to-Date Technology Effective Methods ©2004 Prentice Hall

26. 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 ©2004 Prentice Hall