1. Chapter 15 Managing International Operations

2. International Business 4e
Chapter Preview
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
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International Business 4e

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

4. International Business 4e
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
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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
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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
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International Business 4e

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

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

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

10. competitive advantage International Business 4e
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
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International Business 4e

11. Quality Improvement Total Quality ISO 9000 Management (TQM)
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
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International Business 4e

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

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

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

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

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

17. American Depository Receipts
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
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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
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International Business 4e

19. Subsidiaries financed by International Business 4e
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
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International Business 4e

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

21. Small Business Financing
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
© Prentice Hall, 2008
International Business 4e

22. International Business 4e
Chapter Review
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
© Prentice Hall, 2008
International Business 4e