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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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