International Business

Lecture -57
Global supply chain management
Dr. J. K. Nayak
Department of Management Studies
 Case of Apple Supply Chain
• Apple founded initially by Steve Jobs, Steve Wozniak and Ronald Wayne in 1976
• Apple’s strength- design of new products-iMac, iPad, iPhone, Apple Watch, Apple TV and Apple Music.
• CEO-Tim cook joined in 1997, manufacturing problems, excess inventory had a drag on profits and cash flow.
• Cook developed strong supplier relationships with Asian companies and outsourced products from companies like Foxconn.
• PR issues developed in its contract manufacturers. Some even committed suicide
• Apple became the first company to join the Fair Labour Association(2007). Followed Chinese labour laws.
• Apple was voted as the leading supply chain worldwide for a number of years between 2010 and 2013 by research and
advisory firm, Gartner.
• Apple sells its product through its retail stores, online stores, a direct sales force etc.
• Its sales from outside U.S increased from 40% (2006) to 67%(2016)
• Apple values its sustainability drive. Its new products like the MacBook Air and Mac are made from 100% recycled
aluminum and does focus on three key areas: climate change, resources and smarter chemistry. 100% of its global facilities
are powered by renewable energy, with a 70% decrease in average product energy use in 10 years and a 35% reduction in
overall carbon footprint in comparison to 2015. In addition, Apple is investing 485 megawatts of renewable energy projects
in China to address upstream supply chain emissions.
 Supply chain management
• Supply chain management is the management of the flow of goods
and services and includes all processes that transform raw materials
into final products. It involves the active streamlining of a business's
supply-side activities to maximize customer value and gain a
competitive advantage in the marketplace.
• SCM represents an effort by suppliers to develop and implement
supply chains that are as efficient and economical as
possible. Supply chains cover everything from production to product
development to the information systems needed to direct these
undertakings.
 How Supply Chain Management Works
• Typically, SCM attempts to centrally control or link the production, shipment, and distribution of a
product. By managing the supply chain, companies are able to cut excess costs and deliver products
to the consumer faster. This is done by keeping tighter control of internal inventories, internal
production, distribution, sales, and the inventories of company vendors.
• SCM is based on the idea that nearly every product that comes to market results from the efforts of
various organizations that make up a supply chain. Although supply chains have existed for ages,
most companies have only recently paid attention to them as a value-add to their operations.
• In SCM, the supply chain manager coordinates the logistics of all aspects of the supply chain which
consists of five parts:
• The plan or strategy
• The source (of raw materials or services)
• Manufacturing (focused on productivity and efficiency)
• Delivery and logistics
• The return system (for defective or unwanted products)
 Global Production & Distribution
In today’s global economy, firms must decide
• Location of productive activities
• long-term strategic role of foreign production sites
• whether to own foreign production activities or outsource those activities
• Which items should be outsourced and which ones kept with them
• how to manage a globally dispersed supply chain and what the role of Internet-based
information technology should be in the management of global logistics
• whether to manage global logistics or outsource
 Manufacturing strategy
• Success of global operations strategy depends on compatibility, configuration,
coordination and control.
• Compatibility: it is the degree of consistency between the foreign investment
decision and the company’s competitive strategy. Low cost or differentiation
strategy.
– Efficiency/cost (Cost minimization strategy, offshore manufacturing, high
training cost, risk of stockouts and high inventories)
– Dependability (Prompt deliveries, Availability of components in time, Reduce
the supply chain length, trust in quality, price promises)
– Quality (performance reliability, good service, good maintenance)
– Innovation( develop new products and ideas)
– Flexibility(variety of products, adjust production volume)
 Manufacturing configuration
• Centralized manufacturing
• Regional manufacturing
• Multi-domestic manufacturing
• Offshoring, nearshoring and onshoring
• Coordination
• Control
 Global sourcing
• Global sourcing refers to buying the raw materials or components that go into a
company’s products from around the world, not just from the headquarters’ country.
For example, Starbucks buys its coffee from locations like Colombia and
Guatemala.
• The advantages of global sourcing are quality and lower cost. Global sourcing is
possible to the extent that the world is flat—for example, buying the highest-quality
cocoa beans for making chocolate or buying aluminum from Iceland, where it’s
cheaper because it’s made using free geothermal energy.
 Managerial Issues Associated With Global Sourcing:
• Quality Control

• Building relationships with vendors

– Language barrier

– Cultural difference

– Climate/time difference

– Distance issue
THANKYOU
 International Business
Lecture 56: Survey Methods For International
Research

Dr. J. K. Nayak
Department of Management Studies
 Survey Methods
Telephone Interviewing

• In the United States and Canada, telephone interviewing is the dominant mode of
questionnaire administration.

• But not applicable for most of the Asian economies especially India. Even in many of the
other European countries, such as Great Britain, Finland and Portugal, telephone
interviewing is not a popular method.

• In developing countries, only a few households have telephones. Telephone directories

tend to be incomplete and outdated. In many cultures, face-to-face relationships are
predominant. These factors severely limit the use of telephone interviewing.
 Survey Methods
In-Home Personal Interviews

• Due to high cost, the use of in-home personal interviews has declined in the United States
and Canada, but this is the dominant mode of collecting survey data in many parts of
Europe (e.g., Switzerland and Portugal) and the developing world.

• The majority of the surveys are done door-to-door, while some quick sociopolitical polls
are carried out in the street using accidental routes.
 Survey Methods
Mall Intercept

• Mall intercepts constitute about 15 % of the interviews in Canada and 20% in the United
States.

• While mall intercepts are being conducted in some European countries, such as Sweden,
they are not popular in Europe or developing countries.

• In contrast, central location/street interviews constitute the dominant method of collecting

survey data in France and the Netherlands.
 Survey Methods
Mail Interviews

• Because of low cost, mail interviews continue to be used in most developed countries
where literacy is high and the postal system is well developed.

• Mail interviews constitute 6.2% of the interviews in Canada and 7% in the United States.
In countries where the educational level of the population is extremely high (Denmark,
Finland, Iceland, Norway, Sweden, and the Netherlands), mail interviews are common.

• In Africa, Asia, and South America, however, the use of mail surveys and mail panels is
low because of illiteracy and the large proportion of population living in rural areas.

• Mail surveys are, typically, more effective in industrial international marketing research,
although it is difficult to identify the appropriate respondent within each firm and to
personalize the address.
 Scaling and Measurement Equivalence
in International Marketing Research
Types of Equivalence

Construct Operational Scalar Linguistic

Equivalence Equivalence Equivalence Equivalence

Conceptual Functional Category Item

Equivalence Equivalence Equivalence Equivalence
 Measurement and Scaling
• It is critical to establish the equivalence of scales and measures used to obtain data from
different countries.

• Construct equivalence deals with the question of whether the marketing constructs have
the same meaning and significance in different countries.
– Construct equivalence is comprised of conceptual equivalence, functional equivalence, and category
equivalence.

• Conceptual equivalence deals with the interpretation of brands, products, consumer

behavior, and marketing effort, e.g., special sales.

• Functional equivalence examines whether a given concept or behavior serves the same
role or function in different countries, e.g., bicycles.

• Category equivalence refers to the category in which stimuli like products, brands, and
behaviors are grouped, e.g., principal shopper.
 Measurement and Scaling
• Operational equivalence concerns how theoretical constructs are operationalized to
make measurements, e.g., leisure.

• Item equivalence, which is closely connected to operational equivalence, presupposes

both construct and operational equivalence. To establish item equivalence, the construct
should be measured by the same instrument in different countries.

• Scalar equivalence, also called metric equivalence, is established if the other types of
equivalence have been attained. This involves demonstrating that two individuals from
different countries with the same value on some variable, such as brand loyalty, will score
at the same level on the same test, e.g., top-box or the top-two-boxes scores.

• Linguistic equivalence refers to both the spoken and the written language forms used in
scales, questionnaires, and interviewing. The scales and other verbal stimuli should be
translated so that they are readily understood by respondents in different countries and
have equivalent meaning.
 Questionnaire Translation
Back Translation
• In back translation, the questionnaire is translated from the base language by a bilingual
speaker whose native language is the language into which the questionnaire is being
translated.

• This version is then retranslated back into the original language by a bilingual whose
native language is the initial or base language.

• Translation errors can then be identified.

• Several repeat translations and back translations may be necessary to develop equivalent
questionnaires, and this process can be cumbersome and time-consuming.
 Questionnaire Translation
Parallel Translation

• In parallel translation, a committee of translators, each of whom is fluent in at least two

of the languages in which the questionnaire will be administered, discusses alternative
versions of the questionnaire and makes modifications until consensus is reached.

• In countries where several languages are spoken, the questionnaire should be translated
into the language of each respondent subgroup.

• It is important that any nonverbal stimuli (pictures and advertisements) also be translated
using similar procedures.
Thank you
 International Business
Lecture 58: Global Sourcing, Distribution System, Role
of Internet

Dr. J. K. Nayak
Department of Management Studies
 The global sourcing advantages:
• Low cost manufacturing

• Tapping skills and resources that are not available in the home nation

• Seeking the benefit of alternate suppliers

• Utilizing an efficient supply chain management system

• Learning global business skills

• Meeting competition prudently and efficiently

• Presence in foreign markets

 Disadvantages of global sourcing :
• No exposure of international culture, traditions and beliefs
• Hidden costs related to different time zones and languages
• Financial and political risks associated with emerging economies
• Risk of losing intellectual properties, patents and copyrights
• Long lead times
• Labor problems and labor related issues
• Unnecessary shutdowns and supply interruptions
• Difficulty in supervision
• Difficulty of monitoring goods and services quality
 Sole sourcing
Sole-Sourcing Advantages
• Price discounts based on higher volume
• Rewards for loyalty during tough times
• Exclusivity brings differentiation
• Greater influence with a supplier
Sole-Sourcing Disadvantages
• Higher risk of disruption
• Supplier has more negotiating power on price
 Multisourcing
Multisourcing Advantages
• More flexibility in times of disruption
• Negotiating lower rates by pitting one supplier against another
Multisourcing Disadvantages
• Quality across suppliers may be less uniform
• Less influence with each supplier
• Higher coordination and management costs
 Major sourcing configurations
• Vertical integration
• Industrial clusters
 Make or Buy decision
• A make-or-buy decision is an act of choosing between
manufacturing a product in-house or purchasing it from an
external supplier.
• Also referred to as an outsourcing decision, a make-or-buy
decision compares the costs and benefits associated with
producing a necessary good or service internally to the costs
and benefits involved in hiring an outside supplier for the
resources in question. To compare costs accurately, a
company must consider all aspects regarding the acquisition
and storage of the items versus creating the items in-house.
 Global Logistics and Distribution
• Global logistics and distribution have played a critical role in the growth and
development of world trade and in the integration of manufacturing on a worldwide
scale.
• The use of appropriate distribution channels in international markets increases the
chances of success dramatically.
• As firms start operating on a global basis, logistics managers need to manage shipping
of raw materials, components, and supplies among various manufacturing sites at the
most economical and reliable rates.
• The development of intermodal transportation and electronic tracking technology has
resulted in a quantum jump in the efficiency of the logistic methods employed by
firms worldwide.
Global Logistics
 Global Logistics

• Materials management refers to the inflow of raw material, parts, and supplies
through the firm.

• Physical distribution refers to the movement of the firm’s finished products to

its customers, consisting of transportation, warehousing, inventory, customer
service/order entry, and administration.
Global Distribution Channel
 Differences between Distribution system
• The four main difference between distribution system are retail concentration,
channel length, channel exclusivity, and channel quality.

• Retail concentration: In some countries retail system is concentrated, but it is

fragmented in others.

• In a concentrated retail system, a few retailer supply most of the market. Example:
United States

• A fragmented retail system is one in which there are many retailers, none of which
has major share in the market. Example: Japan
 Differences between Distribution system
• Channel Length: It refers to number of intermediaries between the producer and
the consumer. If producers sells directly to the consumer, the channel is very short.
If the producer sells through an import agent, a wholesaler, and a retailer, a long
channel exists.

• The most important determinant of channel length is the degree to which the retail
system is fragmented. Fragmented retail system tend to promote the growth of
wholesaler to serve retailers, which lengthens channels.

• Japan, India have larger channel length.

• U.S., Britain, Germany have shorter channel length.

 Differences between Distribution system
• Channel Exclusivity: An exclusive distribution channel is one that is difficult for a
new firm to get access to shelf space to supermarkets.

• This exclusivity varies among countries. Japan’s system is often held up as an

example of very exclusive system. In Japan, relationship among manufacturer,
wholesaler, and retailer often go back decades. Many of these relationships are
based on the understanding that distributors will not carry the products of
competing firms. In return, the distributors are guaranteed markup by the
manufacturer.
 Differences between Distribution system
• Channel Quality: It refers to expertise, competencies, and skills of established
retailers in a nation and their ability to sell and support the products of international
business.

• Although the quality of retailers is good in most developed nations, in emerging

markets and less developed nations from Russia to Indonesia, channel quality is
variable at best.

• When channel quality is poor, an international business may have to devote

considerable attention to upgrading the channel, by providing extensive education
and support to existing retailers.
 Global Marketing and Internet
• The Internet has revolutionized the international business arena and global
marketing in particular.

• Roughly speaking, the Internet is a network of computers interconnected

throughout the world operating on a standard protocol that allows data to be
transmitted.

• Until the early 1990s, the Internet was primarily the preserve of the military and
academic researchers
Top 15 countries in Internet Usage
 Internet and Competitive Advantage
• The Internet offers two major benefits to companies that use the tool as a gateway
to global marketing:
1. Cost/efficiency savings
2. Accessibility (connectivity)

• The Internet also offers access to customers around the world.

• The value of some of the pre-Internet sources of competitive advantage has been
deflated.
 Internet and competitive advantage
• Some observers argue that small and large firms are on an equal footing as global
competitors.

• Although size-related advantages will probably lessen, claims that the Internet
provides a level playing field for all are somewhat overblown.
 Role of Internet in Communication
Advantages of internet advertising:

• Global reach
• Lower cost
• Allows precision
• Interactivity
• Ability to customize
• Ability to instantly monitor
THANKYOU
 International Business
Lecture 59: International Human Resource
Management

Dr. J. K. Nayak
Department of Management Studies
 Case of Indian IT sector
• Expats are generally hired for two main reasons. First, in the initial stages of
operations, for their knowledge of and connections to relevant people or
stakeholders in the business.
• Second, it is for their specialized knowledge of a given domain or technology that
the company is trying to work on in India. Both cases are needed for operations to
start and work successfully. The expats mostly come in senior positions and are
generally paid well.
• Some of the expats consider India as a low-cost, low- value and low-capability
country; this, at times, insults sensibilities here. Low-cost is true, but the low-value
and low-capability perceptions need correction
• Leadership issues
 International HRM
• IHRM is defined as, performing HRM and its related activities and arranging for related
and necessary cultural and immigration facilities for prospective and current employees,
by organizations operating in domestic or foreign countries.

• IHRM deals with all functions of HRM in addition to performing other functions
exclusively for expatriates.
• Expatriates are defined as people who live and work away from their home country in
some foreign land.

• P. Morgan defines IHRM as the interplay among human resource activities (i.e. procure,
allocate, and utilize),types of employees(i.e. host-country nationals, parent country
nationals, and third country nationals) and countries(host country, home country and
others).
 What is IHRM
• Boxall, P. (1992) defined International Human Resource Management (IHRM) as
„concerned with the human resource problems of multinational firms in foreign
subsidiaries (such as expatriate management) or more broadly, with the unfolding
HRM issues that are associated with the various stages of the internationalisation
process. (Boxhall, P. 1992).

• Mark Mendenhall (2000) stated that IHRM includes comparative HRM studies;
e.g. differences in how companies in Japan, Thailand, Austria and Switzerland plan
for upgrading of employee skills and so on.
 Why IHRM?
• Increasing globalization has led to movement of firms and employees all over
the world
• Outsouring
• Firms have faced major issues due to human resource management mistakes
• Developing managerial talent in a global business environment
• Managing multicultural workforce
• Advances in technology
 International HRM vs Domestic HRM :

• Various nationalities and culture

• Employees' family complexities
• Influence of international environment: technology, political ideologies
• Varieties of functions: logistical arrangement, immigration details, selection
and recruitment processes.
 Factors affecting IHRM
• Cultural environment
• Political environment
• Economic issues
 Cultural effect on IHRM
• Culture is system of shared meanings and understanding held by members of the
organizations that distinguish from others.

• For ex. Japanese culture that affect working relationship is based on “peace and
harmony”. Japan ranks high on masculinity, collectivism, uncertainty avoidance, and
power distance.

• Americans are mostly individualistic. Their behavioral aspect include: risk taking, bold
initiative, outspoken, confronting and threatening.

• Therefore there are wide conflicting situations in managing American in Japanese firms
and Japanese in American firms.
 Indian Culture in brief
• Indians are high on collectivism in case of family relations and individualistic at
work place. Family relations and social relations are strong.

• They are also high on power distance and masculinity. They respect family
authority, social class and ranks.

• They are aggressive, hardworking, demonstrative, friendly and hospitable.

• They meet the challenges and thrive for goals. Business is based on trust and
honesty. Indians are loyal to organization and profession.
 Political and legal effect on IHRM
• Lack of legal knowledge, what is acceptable and what is not?
• Understanding the political history, current and future trends, political lobby
(regional parties play role)
 Economic issues
• The cost of hiring labour from different countries
• Settling and taking care of the expatriates
• Compensation and taxation issues
• Training and development costs
Thank You
 International Business
Lecture 60: Recruitment and Training in
International HRM

Dr. J. K. Nayak
Department of Management Studies
 International Business Approaches
International business approaches are similar to stages of internationalization or
globalization. Douglas wind and Pelmutter advocated four approaches of
international business.
• Ethnocentric: key positions filled by nationals of parent company
• Polycentric: host country nationals recruited to manage subsidiary in their own
country
• Geocentric: best people recruited, whatever their nationality
• Regiocentric: best people recruited within region in which the subsidiary operates
(e.g. EU, USA).
 Types of employees
• Companies search for prospective employees both from within the country of
operations and outside the country.

• Companies recruit three category of prospective employees.

– parent country nationals,
– host country nationals,
– and third country nationals.
 Parent country nationals
Benefits
• Better familiarity with the parent
organisation’s goal’s, objectives,
policies and practices
• Easy organisational control and
coordination
• Effective communication with parent
country staff
• Worldwide experiences for employees
Risks
• Difficulties in adjustment to the
foreign language, political, cultural
and legal climate
• Cost involved in selection and
training is high
• Impose inappropriate headquarter
style
• Family adjustment problems
 Host country nationals
Benefits
• Familiarity with the foreign language,
political, cultural and legal climate
• Cost of hiring would be less
• Creates better career opportunity for
locals
• Fast response to the host country’s
demands
Risks
• Difficulty in controlling the
subsidiary’s operations
• Difficulty in communicating with the
parent company
• Less opportunity for HCM nationals
to gain international experience
 Third country nationals
Benefits Risks
• These people are generally found to • Host country’s sensitivity to locals of
have a rich experience other countries
• They might be better informed than • Locals may not get growth
the PCN’S opportunities
 Recruitment sources at Macro level
 Ethnocentric Recruitment: It sources the human resources for subsidiaries from
the parent company nationals.

 This approach is followed by Proctor & Gamble, Philips, Toyota etc.

 When Philips filled important vacancies by Dutch nationals, Non Dutch employees
referred them as “Dutch mafia”. Philips is a Dutch multinational conglomerate
corporations.

 Recruiters feel that the parent country nationals have a sense of belongingness with
the company.
 Recruitment sources at Macro level
• Polycentric Approach: It sources prospective employees including senior
managers for the subsidiary from the host country nationals/local nationals.

• Example: South pacific brewery- a subsidiary of Asia-pacific brewery limited

• Coca-Cola Amatil Limited is a subsidiary of Coca-Cola limited.

 Recruitment sources at Macro level
• Regiocentric approach: subsidiary sources the prospective employees within the
region in which the subsidiary is located.

• Example: Bata sources its employees from south east Asian region.\

• LG Sources its employees from Asian region.

 Recruitment sources at Macro level
• Geocentric Approach: Global recruitment approach

• They source all kind of resources like materials, parts, finance, human, technology
and equipment from all the countries in the world.

• Company sources the best prospective employee in term of suitability for the job
from entire globe.

• Example: Ms. Indra Nooyi, the Indian natioanl appointed as CEO of Pepsi cola
limited.
 Micro level sources of Recruitment

• Subsidiaries
• Parent company
• Campus Recruitment
• Private employment agencies/consultants
• Data Banks
• Internship
 Selection in IHRM
• Recruitment helps for identifying the sources of prospective employees and
motivating them to apply for the jobs.

• Most of the MNCs used to follow selection procedure based on talents, job duties,
and job description.

• Majority of employees of international firms normally are expatriates either parent

country national or third country nationals.

• They live as minorities in foreign country.

Career cycle for expatriates
 Cross Cultural Training
• It refers to variety of different training courses. Each in essence aims to develop
awareness between people where a common cultural framework does not exist.

• It has two parallel strands- 1.Cross cultural awareness training 2. cultural/country

specific training

• Cross cultural training deals with manifestation of culture in workplace. The basis
of inter cultural relations are not about changing other people, but adapting oneself
to another culture.
 Cross cultural training
• Cross Cultural training can be divided into three categories-

• 1. Education - It helps managers understand how culture affect themselves as

individuals.

• 2. Actual Training - Training is conducted looking at the way company manage

their workforce. It focuses on different ways of management in different countries.

• 3. Coaching – It includes consulting, including that for a particular projects.

 Cross Cultural Training Methods
• 1. Cultural Assimilator: It is tool that consists of a number of real life scenarios
describing puzzling cross cultural interactions and expectations.

• 2. Contrast American Method: This method involves demonstration of behaviors

that are completely opposed to what is seen in the current context of culture.

• 3. Self reference criterion: This method was developed by Lee (1966), who
proposed 4 steps procedure to overcome self reference criterion. The first step
involves defining any problem of situation in terms of the expatriates own culture,
followed by definition in the terms of host culture. The bias created by SRC is
analyzed and removed in third stage which is followed by solution of the simplified
business problem.
 Cross cultural Training Methods
• 4. Area Simulation: The simulation is creating natural situation of interaction with
people with other culture.

• 5. Cultural self awareness model: It includes usage of video tapes with themes
and role plays.
 Compensation and Benefits
• Rewards can be intrinsic and extrinsic.

• Intrinsic reward is a feeling of pride of a job well done and achievement.

• Extrinsic reward include praise from a superior, salary, employee benefits, career
progression etc.

• Compensation is extrinsic reward for an employee.

• Compensation is the amount of remuneration paid to an employee by the employer

in return to employee’s service to the company.
Compensation and complexities
• Expatriate performance is crucial to the success of an MNC, however, one-
third of expatriates fail in their international assignments (Tung, 1988) and
such failures have very high-costs attached (Shaffer et al., 1999; Strohet
al., 2000).
• Individual- and organizational-level factors are found to correlate with the
success or failure of expatriates.
• Personality differences, motivation and adjustment issues of the
expatriate in a cross-cultural environment (Black et al., 1999; Shaffer et al.,
1999; Lomax, 2001; Selmer, 2002); unsystematic expatriate selection and
preparation, inability of the spouse to adjust and prejudices of HCNs come
in the way of an expatriate’s success (Caligiuri and Cascio, 1998; Harris et
al., 2003).
Thank You