1. Introduction to International Operations Management

2. Dr. Cem Canel
Office: CIS Building, 2016
Phone (office):

3. Population of Mini World
If we could shrink the world’s population to a village of 100, with people and nations remaining the same, below is how we would look …
There would be:
57 from Asia
21 from Europe
14 from Western Hemisphere (North & South America)
8 from Africa
95 would live outside the U.S.
70 would be Non-White; 30 would be White
70 would be Non-Christian
50% of world’s wealth in hands of 6 people – all from the U.S.
70 unable to read
50 suffer from malnutrition
80 live in substandard conditions
1 of 100 has a university education

4. Business Environment Sales Promotion Research Behavior Org. Behavior
Operations
Finance
Economics
Management
Marketing
Information Systems
Accounting
Improvement of organizational activities to ensure quality, customer satisfaction , and loyalty
Sales
Promotion
Research Behavior
The study of how the forces of supply and demand allocate scarce resources
Org. Behavior
Policy
Strategy
The application of people, technologies, and procedures to solve business problems
Nceufhkurreffg
Bookkeeping
Pensions
Audits
Investments
Capital
Stock Market

5. Why go global?
Reduce costs Improve supply chain Provide better goods and services Attract new markets Learn to improve operations Attract and retain global talent

6. Specific Drivers of Globalization
Political forces
Reduction of barriers to trade and foreign investment by governments
Privatization of former communist nations
Porous borders between countries
Technology forces
Innovations in computers, information technology, communications technology (Internet, networking), and transportation
Market forces
The globalization of financial markets;
Globalizing companies become global customers
Cost forces
Goal for economies of scale to reduce unit costs
The creation of a global labor force
Rapidly falling freight costs
Competitive forces
Increase in intensity due to explosive growth in international business

7. International Environment
All the forces influencing the life and development of the firm
Forces
External Forces (Uncontrollable) – Forces over which management has no direct control
Internal Forces (Controllable) – Forces that management can use to adapt to external forces
Why is International Business Different?
International business managers must deal with forces from three environments instead of one,
domestic,
international and
foreign.
Forces in the Environments
External (uncontrollable)
a. Competitive f. Physical
b. Distributive g. Political
c. Economic h. Sociocultural
d. Financial i. Labor
e. Legal j. Technological
Internal (controllable)
a. Personnel c. Production
b. Finance d. Marketing

8. The International Environment
Political:
Governments
Ideology
Stability
Civil Strife
Economic:
Trade Agreements
Trading Blocs
GNP/Wages
Inflation
Cultural:
Customs
Values
Language
Religion
The
International
Company
Legal:
International Law
Host Country Laws
Home Laws
International Piracy
Infrastructure:
Communications
Internet
Transportation
Technology

9. External Forces
Uncontrollable External Forces: Forces over which management has no direct control
Competitive
Competition (kind, number, location) in other countries
Distributive
Distribution channel forces for distributing goods and services
Economic
Economic infrastructure: GNP, unit labor cost, personal consumption expenditure
Socioeconomic
Characteristics of human population (market demographics)
Financial
Capital markets: interest rates, inflation rates, taxation
Legal
Laws governing how international firms must operate, e.g., property rights
Physical
Topography: climate, and natural resources
Political
Forms of government, international organizations; nationalism, political risk
Sociocultural
Language, values, attitudes, beliefs, and opinions
Labor
Quantity, quality of skills, attitudes of labor
Technology
Modern or primitive equipment and skills that affect how resources are converted to products

10. Internal Forces
Internal Forces (Controllable) – Forces that management can use to adapt to external forces
Factors of Production
Capital, raw materials, and people
Activities of the organization
Personnel, finance, production, and marketing

11. Multi-national Companies…
US Factory
US DC
Americas Demand
US Suppliers
Singapore Factory
European DC
European Demand
Off Shore Suppliers
Asia/Pacific DC
Asia/Pacific Demand
Kit Suppliers

12. Types of International OM Decisions
Strategic
long term, often involving acquiring new resources
- e.g., power station construction (at electric utility)
Tactical
- medium term, utilization of existing resources
- e.g., workforce commitments
Operational
- short term, execution of schedules or control activities
- e.g., shift scheduling (in a hospital)

13. Forecasting demands in different cities around the world

14. Responsibility for Quality
Customer
Service
Marketing
Quality
Product Or
Service
Packaging and
Storage
Design
Engineering
Inspection
and Test
Procurement
Production
Process
Design

15. Where would you locate…
An amusement park?
A new pharmacy?
Amazon’s new distribution center?

16. Factors to consider… Distances to surrounding community?
Patient traffic?
An amusement park in ALASKA?
A new pharmacy?
Length of summer season?
Sufficient population?
Quantity of labor?
Labor costs?
Local laws?
Distances from online customers?
Transportation costs?
Unions?
Taxes?
Dabur’s new distribution center?

17. IOM Decisions
Where to locate franchises?

18. Airports in different cities around the world

19. Global Supply Chain Management
Involves total systems approach to managing flow of
Materials
Information
Finances
Services
Process of
coordinating and
integrating
.the
flow of materials,
information,
finances, and
services
within and among companies in the value chain from suppliers to the ultimate consumer
What recent developments have caused supply chain management to become increasingly important to international companies?
Individual businesses no longer operate in a vacuum and are forced to compete with businesses from around the globe.
For this reason management should be constantly searching for methods to improve quality and lower the overall cost of production.
In addition, businesses have begun to use the outsourcing of non-core activities in an effort to give the company the opportunity to focus on core business activities.

20. Global Supply-Chains

21. Global Sourcing Considerations Costs Control Expertise Distance
Languages
Laws and regulations
Reasons for Sourcing Globally
The primary reason for sourcing globally is to obtain lower prices.
In addition, certain products may not be available locally.
Also, the firms competitors may be using components of better quality or better design.
When deciding to source internationally, companies can either set up their own facilities or outsource the production to other companies.
Outsourcing has become an increasingly common option for companies, as they try to
focus scarce resources on their core competencies and
leverage the skills of other companies
to reduce costs and capital investments,
improve flexibility and speed of response,
enhance quality, or
provide other strategic benefits.
Any part of the value chain can be outsourced.
Done properly, including a strong link to strategy, outsourcing can deliver dramatic increases in value for companies and their customers.

22. Global Sourcing The Lure of Global Sourcing
Suppliers with improved competitiveness
Cost
Quality
Timeliness
Suppliers in less developed countries (LDC) with low-cost labor
Attractive for labor-intensive products with low skill requirements
The lure of global sourcing is the existence of suppliers with improved competitiveness in terms of
cost,
quality,
timeliness, and
other relevant dimensions.
The rate at which developing nations shift to more sophisticated processes is often more rapid than the initial emergence of these processes in a developed country.
In part, this may be due to an emerging nation’s ability to transfer technology and processes previously invented and commercialized in the more developed nations, thus avoiding the cost and time of inventing these technologies on its own.
The ability to use effectively and efficiently global sources has been enhanced by
the plummeting cost of communications,
widespread use of standardized interfaces such as World Wide Web browsers, and
the increasing pace at which companies are automating and digitizing data.

23. Ford’s Global Network to Support the Manufacturing of the Escort

24. Logistics
Movement of materials
Must interface with sourcing , manufacturing, design, engineering and marketing
Logistics
The managerial functions associated with the movement of materials such as raw materials, work-in-progress or finished goods.
Outsourcing an increasingly explored option.
Organization and Staffing
1. Standardization of production processes and procedures simplifies the manufacturing organization at headquarters, because the work can be accomplished with smaller staff.
2. Logistics of Supply suggest greater profits may be obtained by organizing all production facilities into one logistical supply system.
Rationalization, the effort to leverage an international company’s resources in an effort to create simplicity, works best with similar consumer tastes.
Goal is all plants interchangeable.
Purchasing for standardized system offers cost opportunities and other efficiencies. May be centralized.
Control
1. Quality control is more efficient and easier to manage because standards are unified.
2. Maintenance and production control also benefits from standardization.
Planning: Standardized facilities leads to simpler and quicker planning
1. Design engineers need only copy drawing and lists of materials
2. Vendors supply similar equipment
3. Manufacturing specifications apply across the production system
4. Training process simplified
5. Forecasts benefit from previous experience in similar contexts
Packaging and transportation requirements can greatly increase logistics costs
Many companies outsource logistics

25. Container Ships Are Getting Larger
The Voluntary Intermodal Sealift Agreement, commonly known as VISA, is the DOD’s primary sealift readiness program.
After 2 years in joint development between DOD and Department of Transportation,the Secretary of Defense approved VISA for full implementation on 30 Jan 97.
The objective of VISA is to provide DOD a coordinated, seamless transition from peacetime to wartime for the acquisition of commercial sealift and intermodal capability to augment DOD’s organic sealift capabilities
This vessel shown here is a Crowley “wolf” class container ship, Crowley is a member of VISA and has 3 “wolf” class vessels in the Maritime Security Program

26. Why Is International Operations Different?
Domestic Environment
Foreign Environment
International Environment
All the uncontrollable forces are in the home country that surround and influence the firm’s life and development
All the uncontrollable forces that originate outside the home country that surround and influence the firm have
different values
difficult to assess
Interrelated
Interaction between domestic and foreign environmental forces or between sets of foreign environmental forces
Key Point: Increased complexity for decision-making

27. Globalization is the Future and cannot happen without international operations

28. http://www. michaelhartzell