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Transcript of globalbusinesstoday-130203075553-phpapp01 (2014_07_04 09_24_38 UTC)
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Global Business Today6e
by Charles W.L. Hill
McGraw-Hill/Irwin Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
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Strategy, Production, and Logistics
Question:How can production and logisticsbeconducted internationally to
1.lower the costs of value creation
2.add value by better serving customer needs?
Productionrefers to activities involved in creating aproduct
Logisticsrefers to the procurement and physicaltransmission of material through the supply chain, fromsuppliers to customers
The Six Sigma system, a direct descendant of totalquality management (TQM), aims to reduce defects,boost productivity, eliminate waste, and cut coststhroughout a company
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Where to Produce
Question:Where should production
activities be located?
When deciding where to locate
production facilities, firms must
consider
1. country factors
2. technological factors
3. product factors
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Outsourcing Production:Make-or-Buy Decisions
Question:Should an internationalbusiness make the component parts togo into their final product or outsource
them?
Make-or-buy decisions(decisions aboutwhether to perform a certain value
creation activity in-house or outsource itto another firm) are important to a firmsmanufacturing strategy
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Outsourcing Production:Make-or-Buy Decisions
Making component parts in-house
(vertical integration) is attractive
because it
1. is associated with lower costs
2. facilitates investments in highly
specialized assets
3. protects proprietary technology
4. facilitates the scheduling of adjacent
processes
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Outsourcing Production:Make-or-Buy Decisions
Buying component parts from
independent suppliers (outsourcing) is
attractive because it
1. gives the firm greater flexibility
2. helps drive down the firm's cost
structure
3. helps the firm to capture orders frominternational customers
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Outsourcing Production:Make-or-Buy Decisions
The benefits of manufacturing components in-
house are greatest when
highly specialized assets are involved
when vertical integration is necessary forprotecting proprietary technology
when the firm is more efficient than external
suppliers at performing a particular activity
Some firms have tried to use strategic alliancesto capture some of the benefits of vertical
integration, without having the associated
organizational problems
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Managing a Global Supply Chain
Question:Why is logistics important to theinternational firm?
Logisticsencompasses the activities necessaryto get materials to a manufacturing facility,through the manufacturing process, and outthrough a distribution system to the end user
In international business, this is complicated by
distance, time, exchange rates, and customsbarriers, etc.
Efficient logistics can have a major impact upona firm's bottom line
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Managing a Global Supply Chain
Question:How can a just-in-time inventoryprocess help a firm?
Ajust-in-time (JIT)economizes on inventoryholding costs by having materials arrive at amanufacturing plant just in time to enter theproduction process, and not before
It can result in major cost savings from reduced
warehousing and inventory holding costs It can help firms spot defective parts, take them
out of the manufacturing process, and boostproduct quality
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Managing a Global Supply Chain
Question:What is the role of informationtechnology in materials management?
Electronic data interchange (EDI)facilitates the tracking of inputs
allows the firm to optimize itsproduction schedule
allows the firm and its suppliers tocommunicate in real time
eliminates the flow of paperworkbetween a firm and its suppliers