intern

ation

al bu

siness, 5

th edition

chapter 17international operations management

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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

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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

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Operations Management

Operations management is the set of activities an organization uses to transform different kinds of inputs (materials, labor, and so on) into final goods and services.

International operations management refers to the transformation-related activities of an international firm.

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Figure 17.1 The International Operations Management Process

Strategic context

Production

Acquisitionof resources

Location decisions

Logistics

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Complexities of International Operations Management

Resources

LogisticsLocation

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Forms of Operations Management

Productionmanagement

Service operations

management

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Supply Chain Management

Supply chain management is the set of processes and steps a firm uses to acquire the

various resources it needs to create its products.

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Figure 17.2 Basic Make-or-Buy Options

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Influence Factors for the Make-or-Buy Decision

Size Scope of operations

Technologicalexpertise

Nature of product

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Figure 17.3 Competitive Advantage versus Strategic Vulnerability

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Necessary Trade-Offs in the Make-or-Buy Decision

Trade-offs

Control

Risk

Investment

CostFlexibility

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Factors Affecting Location Decisions

Country-related issues

Product-related issues

Government policies

Organizational issues

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Country-Related Issues

Resource availability

Infrastructure

Country-of-origin effects

Cost

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Country-Related Issues

Such issues play key roles in location decisions for manufacturers.

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Product-Related Issues

Value-to-weightratio

Required productiontechnology

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Government Policies

• Stability of political process

• National trade policies

• Economic development incentives

• Existence of foreign trade zones (FTZ)

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Organizational Issues

Business strategy

Inventory managementpolicies

Organizationalstructure

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International Logistics

International logistics is the management of the flow of materials, parts, supplies,

and other resources from suppliers to the firm; the flow of materials, parts,

supplies, and other resources within and between units of the firm itself; and the flow of finished products, services, and goods from the firm to customers.

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Factors Distinguishing International and Domestic Logistics

Transportdistance

Complexity ofregulatory content

Number of transport modes

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Characteristics of International Services

• Services are intangible

• Services are not storable

• Services may require customer participation

• Services may be tied to the purchase of other products

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Managing Service Operations

Capacity planning

Location planning

Facilities design and layout

Operations scheduling

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Productivity

Productivity is an economic measure

of efficiency that summarizes the value of outputs relative to the value

of the inputs used to create the outputs.

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Strategies for Enhancing Productivity

• Spend more on R&D

• Improve operations

• Increase employee involvement

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International Organization for Standardization

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Figure 17.4 Essential Components of Total Quality Management

Strategic Commitment to Quality

EmployeeInvolvement

High-QualityMaterials

Up-to-DateTechnology

Effective Methods

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Key Components of Total Quality Management

Statisticalprocesscontrol

Benchmarking