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Production Strategy
Production Strategy
Chapter 10
Production strategy
Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
Slide 10.2
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GLOBAL SOURCING
Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
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Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
Slide 10.5
GLOBAL SOURCING
Global sourcing is the procurement of products or services from suppliers or company-owned subsidiaries located abroad for consumption in the home country or a third country. Also called global procurement or global purchasing, global sourcing amounts to importing -- an inbound flow. It is an entry strategy that involves a contractual relationship between the buyer (the focal firm) and a foreign supplier. It involves subcontracting the performance of specific manufacturing or services tasks to the firm's own subsidiaries or independent suppliers. Global sourcing is classified as a low-control strategy to the extent that the firm is buying from independent suppliers through contractual agreements, as opposed to buying from its own subsidiaries.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
Slide 10.6
Technological advances, including instant Internet connectivity and broadband availability Declining communication and transportation costs
Widespread access to vast information including growing connectivity between suppliers and the customers that they serve; and
Entrepreneurship and rapid economic transformation in emerging markets.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
Slide 10.7
Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
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Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
Slide 10.9
Configuration of value-adding activity: The pattern or geographic arrangement of locations where the firm carries out value-chain activities.
Instead of concentrating value-adding activities in the home country, many firms configure these activities across the world to save money, reduce delivery time, access factors of production, and extract maximal advantages relative to competitors. This helps explain the migration of traditional industries from Europe, Japan, and the U.S. to emerging markets in Asia, Latin America, and Eastern Europe.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
Slide 10.10
Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
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AN EXAMPLE OF WORLDWIDE CONFIGURATION OF VALUE CHAIN The German automaker BMW employs 70,000 factory personnel at 23 sites in 13 countries to manufacture its vehicles. Workers at the Munich plant build the BMW 3 Series and supply engines and key body components to other BMW factories abroad. In the U.S., BMW has a plant in South Carolina, which makes over 500 vehicles daily for the world market. In Northeast China, BMW makes cars in a joint venture with Brilliance China Automotive Holdings Ltd. In India, BMW has a manufacturing presence to serve the needs of the rapidly growing South Asia market. BMW must configure sourcing at the best locations worldwide, in order to minimize costs (e.g., by producing in China), access skilled personnel (by producing in Germany), remain close to key markets (by producing in China, India and the U.S.).
Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
Slide 10.12
Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
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Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
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Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
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Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
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SPEED-TO-MARKET
One of the major manufacturing challenges facing MNEs is the speed with which they develop and get new products to market. By carefully designing the product and getting it out the door fast, the company can dramatically increase profitability.
Early delivery of their products
Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
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IMPORTANCE OF SERVICE
Developing a strong service orientation:
Many products have a service element associated with them.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
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Figure 10.3
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INTERNATIONAL LOGISTICS
Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
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Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
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Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
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INTERNATIONAL LOGISTICS
International logistics: The designing and managing of a system to control the flow of materials and products throughout the firm.
Transportation
for example: ocean shipping and air shipping
Packaging
Storage.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
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Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
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Alan M Rugman and Simon Collinson, International Business, 5th Edition, Pearson Education Limited 2009
Slide 10.25
Figure 10.4