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Chapter 15 Managing International Operations

Chapter 15 Managing International Operations. Identify the types of planning involved in production strategy List the reasons for making or buying inputs Explain several issues that are of special concern in production strategy Discuss problems of international debt financing

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Chapter 15 Managing International Operations

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  1. Chapter 15 Managing International Operations

  2. Identify the types of planning involved in production strategy List the reasons for making or buying inputs Explain several issues that are of special concern in production strategy Discuss problems of international debt financing Identify each source of equity financing available to international companies Chapter Preview International Business 4e

  3. Reflects overall firm strategy Low-cost leadership Differentiation • Focus Production Strategy Essential to achieving objectives International Business 4e

  4. Capacity Planning Assessing a company’s ability to produce enough output to satisfy market demand • Number of work shifts • Number of employees • Size of facilities • Subcontracting International Business 4e

  5. Facilities Location Planning Selecting the location for production facilities Location economies Centralized Decentralized Economic benefits derived from locating production activities in optimal locations Centralized production tends to be well-suited to global strategy Decentralized production tends to be well-suited to multinational strategy International Business 4e

  6. Process Planning Deciding the process that a company will use to create its product • Standardization • Suits low-cost leadership • Adaptation • Suits differentiation and focus International Business 4e

  7. Reflects business-level strategy • Location’s geography also a factor Facilities Layout Planning Deciding the spatial arrangement of production processes within facilities International Business 4e

  8. Make-or-Buy Decision Raw materials Intermediate components Availability Needed modifications Cost considerations International Business 4e

  9. Reasons to make Lower cost Greater control Decision to Make • Vertical integration • Extend control over inputs (backward integration) • or output (forward integration) International Business 4e

  10. Decision to Buy Outsourcing Reasons to buy Buying from another company a good or service that is not central to a company’s competitive advantage Lower risk Greater flexibility Market power Barriers to buying International Business 4e

  11. Quality Improvement Total Quality Management (TQM) ISO 9000 Continuous quality improvement to meet or exceed customer expectations through quality-enhancing processes International Standards Organization 9000 is a certification a firm gets when it meets the highest quality standards in its industry International Business 4e

  12. Shipping costs Inventory costs Just-in-time (JIT) manufacturing Other Production Issues International Business 4e

  13. Decision to Reinvest or Divest Reinvest Divest • Promising outlook • Growing market • Highest return • Unprofitable outlook • Social unrest International Business 4e

  14. Pay operating expenses Expand production capacity Enter new geographic markets Develop and reward employees Invest in new projects and much more… Financing Business Operations Financial resources needed to: International Business 4e

  15. Difficulties: • Exchange-rate risk • Currency inconvertibility • Restricted capital flows Borrowing International Business 4e

  16. Back-to-Back Loan International Business 4e

  17. Certificates traded in the U.S. that represent a specific number of shares in a non–U.S. company No currency-conversion fees No minimum purchase amounts Attractive to U.S. mutual funds American Depository Receipts International Business 4e

  18. Emerging Stock Markets Hot money: Liquid investments that can be quickly withdrawn Extreme volatility Patient money: Holdings of factories, equipment, and land that cannot be quickly withdrawn Poor regulation International Business 4e

  19. Internal Funding Equity, debt, and fees Revenue from operations Subsidiaries financed by parents, who are later rewarded financially Money earned from sales is the lifeblood of every company International Business 4e

  20. Capital Structure Mix of equity, debt, and internal funds used to finance activities International Business 4e

  21. Tips for entrepreneurs to find funds: Contact business schools with strong international programs Consult your country’s commerce department Leverage your contacts Attend industry events in other countries Consider hiring an intermediary Small Business Financing International Business 4e

  22. Identify the types of planning involved in production strategy List the reasons for making or buying inputs Explain several issues that are of special concern in production strategy Discuss problems of international debt financing Identify each source of equity financing available to international companies Chapter Review International Business 4e

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