Unit – IV PRODUCTION, MARKETING, FINANCIAL & HUMAN RESOURCE MANAGEMENT OF GLOBAL BUSINESS

INTRODUCTION – GLOBAL PRODUCTION Global production provides an unparalleled opportunity for companies to grow into new markets while at the same time boosting their competitiveness. Reasons ◦ Import restrictions ◦ Raw materials ◦ Inputs ◦ Human resource ◦ Labor laws ◦ Logistics management ◦ Export ◦ Different consumers

Location of production Meaning – location of production It determines the cost of marketing and availability of the products to the international customers. Meaning – production location Production location is concerned with the establishment of manufacturing facility at a particular place or location

Factors behind the selection of a location 1.Size8. Logistics 2. Raw Material9. Economies of scale 3. Currency10. Low – cost site 4. Political11. Quality 5. Cultural12. Subsidiaries 6. Market13.Customers 7.labour

Global location decision Country Factors Technology Factors Product Factors Government Policies Organizational Issues Business Strategy Issues Inventory Management Policies

Scale of operations The term scale of production refers to the quantity or numbers of a product made. Its decisions will be influenced by the: Volume or quantities of products required Types of materials used to make the products Type of product being manufactured Input factors: Land, labour, capital, resources, and technology…

Scales of production Continuous production EX: FMCG products Batch Production EX: Furniture, Auto Ancillary Single Item Production EX: Designers, Bicycle mfg

Cost of Production Labour Costs Capital costs and depreciation Cost of materials

Make or buy

Make or buy decisions The make or buy decisions is the act of making a strategic choice between producing an item internally (in house) or buying it externally (from an outside supplier). The buy side of the decision also is referred to as outsourcing Outsourcing

Advantages of Make or buy decision Advantages Lower costStrategic flexibility Facilitating Specialized Investments Lower Costs Proprietary Product Technology Protection Offsets Improved SchedulingStrategic Alliance with Suppliers

Global Supply Chain It is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end users.

Issues in global supply chain Costs Exchange Rate Time Weather Conditions Customs Sourcing Plan Supplier Selections Additional considerations

Significance of Making Lower Costs Facilitating specialized investments Proprietary product technology production Improved scheduling

Significance of Buying Strategic flexibility Lower cost offsets

Global supply chain management Supply chain management deals with the total flow of material from supplier through the end user.

Global supply chain business process Customer relationship managementCustomer Service ManagementDemand ManagementOrder fulfillmentManufacturing Flow ManagementprocurementProduct Development and CommercializationReturns Management

Quality considerations Quality defined as meeting or exceeding the expectations of the customer. It is the conformance to specifications, value, fitness for use, support and psychological impressions

Globalization of markets - Reasons Mass Production Risk reduction Increase Profits Adverse Conditions of home country To cater the demand of the foreign market Unfulfilled needs of the customers by the domestic companies

Marketing strategy The International Marketing Strategies should depends on the company’s Marketing Orientation ◦ Production orientation ◦ Sales orientation ◦ Customer orientation ◦ Strategic marketing orientation ◦ Societal marketing orientation Targeting and segmenting markets

Marketing orientations There are 5 common orientation Production orientation Sales orientation Customer Orientation Strategic Marketing orientation Societal Marketing orientation

Target Markets 3 Segmentations By Country By Global Segment By Multiple Criteria

Product Development Product development is the process of finding out the possibility of producing a product. It involves the adding, dropping, and modification of item specifications in the product line for a given period of time.

Factors contributing to product development Changing customer preferences Technological changes International laws and Govt. Policies Product Life Cycle

Challenges in product development Key Factors Designing a Specific Product Designing a Specific Product Platform Flexibility Platform Flexibility Design for the Market Design for the Market Complexity Management Complexity Management Variant Design Variant Design Customer Involvement Customer Involvement Build Anywhere Build Anywhere Outsourcing Outsourcing Design Everywhere Design Everywhere Product Development Product Development Development Speed Development Speed

Pricing Strategies Skimming Strategy Penetration Pricing Strategy Differential pricing Strategy Geographic pricing Strategy Product line pricing Strategy

Pricing Strategies Factors affecting International pricing Strategies Govt Interventions Govt Interventions Market Diversity Market Diversity Export price Escalation Export price Escalation Fixed vs Variable Pricing Fixed vs Variable Pricing Relations with Suppliers Relations with Suppliers

Channel Management It is one of 4P’s ‘Place’ The term channel management has two meanings 1. The Physical movement of goods from the place of manufacture to a location in or close to points of purchase 2. A marketing channel can be seen as a concatenation of individuals and organizations involved in the process of making goods or services available for use or consumption

Investment decisions Capital Budgeting Country Risk Analysis Sources of funds Foreign Exchange Risk

Sources of Funds Internal Sources ◦ Funds from the parent (Equity / Loans) ◦ Funds provided by operations ◦ Loans from sister subsidiaries ◦ Global cash management ◦ Multilateral netting

External Sources Debt financing Venture capital Equity financing Factoring Forfeiting Equipment leasing

Exchange rate risk The risk that a business operations or an investment’s value will be affected by changes in exchange rates. Foreign exchange risk is the level of uncertainty that a company must manage for changes in foreign exchange rates that will adversely affect the money the company receives for goods and services over a period of time.

Selection of expatriate managers There are four dimensions that seem to success in a foreign posting: 1. Self Orientation 2. Others Orientation 3. perceptual Ability 4. Cultural Toughness

Selection of Expatriate managers Identification of expatriate poolAssessment of I.Q.Determination of Learning stylesDetermination of thinking stylesDetermination of assignment taskAssessment of family characteristicsDevelopment of Repatriation programSelection of expatriate candidtes

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