Chapter 2 – Operations Management in a Global Environment

Reasons to Globalize
• Reduce costs (labor, taxes, tariffs, etc.) •improve supply chain • provide better goods and services • understand markets •learn more to improve operations • attract and retain global talent
Reduce Costs
foreign location with lower wage rates can lower direct and indirect costs
Improve Supply Chain
locating facilities close to unique resources
Provide Better Goods and Services
objective and subjective characteristics of goods and services; on-time deliveries, cultural variables, improved customer service
Understand Markets
interactive with foreign customers and suppliers can lead to new opportunities
Learn to Improve Operations
remain open to the free flow of ideas
Attract and Retain Global talent
offer better employment opportunities; growth opportunities and insulation against unemployment; relocate unneeded personnel to more prosperous locations
Cultural and Ethical Issues
Cultures/Attitudes are different: punctuality, lunch breaks, environment, intellectual property, thievery, bribery, child labor
literacy rate• National literacy rate •Rate of innovation •Rate of technology change •Number of skilled workers •Political stability •Product liability laws •Export restrictions •Variations in language • Work ethic •Tax rates •Inflation •Availability of raw materials •Interest rates •Population • Number of miles of highway •Phone system
Develop a Mission
mission statements tell an organization where it is going •organization purpose for being • answers “What do we provide society?” • provides boundaries and focus
Factors Affecting Mission
philosophy and values • profitability and growth • public image • benefit to society • customers • environment
Develop a Strategy
the strategy tells the organization how to get there •action plan to achieve mission • functional areas have strategies • strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses
Strategies for Competitive Advantage
• differentiation – better, or at least different • cost leadership – cheaper • response – rapid response
uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer’s perception of value
provide the maximum value as perceived by the customer; does not imply low quality
flexibility in matching market changes in design innovation and volumes; reliability in meeting standards; timeliness in design, production, and delivery
10 Strategic OM Decisions
•Goods and Service Design • Quality •Process and Capacity Design •Location selection • Layout Design • Human Resource and Job Design • Supply-Chain Management • Inventory •Scheduling •Maintenance
Managing Global Operations
requires perspective on •capacity planning •location planning •facilities design and layout •scheduling
Issues in Operations Strategy
•resources view •value chain analysis •Porter’s Five Forces Model •operating in a system with many external factors •constant change
Product Life Cycle
introduction > growth > maturity > decline
Company Strategies/Issues – best period to increase market share; R&D engineering is critical OM Strategies/Issues – design and development is critical, frequent changes; short production runs; high production costs; limited models; attention to quality
Company Strategies/Issues – practical to change price or quality image; strengthen niche OM Strategies/Issues – forecasting critical; product design and reliability; competitive product improvements and options; increase capacity; shift toward product focus; enhance distribution
Company Strategies/Issues – poor time to change image, price, or quality; competitive costs become critical to defend market position OM Strategies/Issues – standardization; fewer product changes, more minor changes; optimum capacity; increasing stability of process; long production runs; product improvement and cost cutting
Company Strategies/Issues – cost control is critical OM Strategies/Issues – little product differentiation; cost minimization; overcapacity in the industry; prune line to elimination items not return good margin; reduce capacity
Strategy Development Process
Analyze the Market > Determine the Corporation Mission > Form a Strategy
Analyze the Market
identify the SWOT; understand the environment, customers, industry and competitors
Determine the Corporate Mission
State the reason for the firm’s existence and identify the value it wishes to create
Form a Strategy
Build a competitive advantage, such as low price, design, or volume flexibility, quality, quick delivery, dependability, after-sale service, broad product lines
Strategy Development and Implementation
• identify key success factors • build and staff the organization • integrate OM with other activities
International Operations Strategies
•Global Strategy •Transnational Strategy • International Strategy •Multidomestic Strategy
Global Strategy
high cost reduction/low local responsiveness considerations standardized product; economics of scale; cross-cultural learning ex: Texas Instruments; Caterpillar; Otis Elevator
Transnational Strategy
high cost reduction/high local responsiveness considerations move material, people, ideas across national boundaries; economics of scale; cross-cultural learning ex: Coca-cola, Nestle
International Strategy
low cost reduction/local responsiveness considerations import/export or license existing product ex: US Steel, Harley Davidson
Multi-Domestic Strategy
use domestic model globally; franchise, joint ventures, subsidiaries ex: Heinz, McDonalds, The Body Shop, Hard Rock Café