Global Business- Strategic

Planning
(Import, Export & Manufacturing)
Global Supply Chain Overview
Insurance& Others
Certifications etc.
Risk Mgmt
Funds
P&S Transfer System
Delivery System

Contract
Exporter (Products Importer
&Services)

Global Business Framework

(Logistics, Economic, Cultural,
Political & Legal)
 Why should you go global?
• Increasing Globalization markets
• Increase Globalization of production
• Increasing Globalization resources
• World is becoming a large global village
• Going Global has become essential to
maintain competitive edge in domestic
as well as world market
Six Reasons For Global Sourcing
1- Superior Quality
2-Better timeliness- lesser lead time than local sources
3- Lower Cost
4- Broader Supply Base
5-More advanced Technology
6- Expanded customer base- sell in that country
 Global Supply Channels
• Import merchants- import and sell goods themselves
• Commission houses- Source for you from exporter abroad,
no commission by you, goods billed & shipped to you directly, do
handle docs.
• Agents or representatives- Represent sellers, do handle
documents
• Import brokers- Bring buyer-seller together, both pay
commission.
• Trading houses- Far more organized, handle all aspects of
transaction
• Subsidiary company- Fully owned by parent co., levy
service charge
• International Procurement office- Office in foreign
country
• Directly from Supplier/manufacturer- No
intermediary
 Growth Stages to Global Supply
Management
1-International Purchasing- Focus on volume,
minimize price, manage inventory costs; entry phase to global arena

2-Global Sourcing- Focus on global opportunity, supplier

capability, strategic production support, customer service supports,-
already off shored for some time

3-Global Supply Management- Focus on

optimizing supply network, effective logistics and capacity
management worldwide; technological leadership

4-Tansnational Corporation- Next stage of

evolution; Instant communication and funds transfer capability; real
time operations of buying, selling, tracking etc
Potential Risks and Problems
• Cultural Issues- Hong Kong example of four
• Long lead time
• Additional inventories
• Lower quality
• Social and labor problems-Nike Sweat Shop
• Higher cost of doing business
• Opacity risk- Global opacity index
 Questions before going global
• Does it qualify as high-volume in your industry?
• Does it have a long life (2-3 years)?
• Does it lend itself to repetitive manufacturing?
• Is demand of the product fairly stable?
• Are specifications and drawings clear and well
defined?
• Is technology not available domestically at
competitive prices?
• Will there be adequate warrantees and back up
support?
If answer to these questions is yes, evaluate
support network with in your firm
 Evaluating internal support
network
• Engineering support to facilitate change?
• Will there be enough time to phase out
existing pipeline inventory?
• Will supply source provide required
education and training
• Are you prepared to make financial
commitments?
• Is your firm fully aware other factors
effecting source of supply?
 Direct Supply Sourcing
• Start with intermediary source
• Trade Directories & Embassies
• Trade fairs
• Goggle Search
• Initial contacts-by e-mail, letters and telephone
• Personal meeting- Prepare; commercial,technical, cultural
• Negotiations- prepare; price and other areas of interest
• Samples and trial order
• Bulk order
 Major Issues in Global Supply
Management
• Shipping, warehousing and delivery issues
• Methods of Payment
• Currency exchange related risks
• Documentation related issues
• Inspections and quality assurance
management
• Counter Trade
• Regional Trade alliances
 Transportation and delivery
issues
• Which mode of transport to be used-
Sea, Air, Surface, multimodal
• Full container of part container (20 ft, 40ft)
• Temporary/ in transit storage
• Liner or chartered vessels
• Break-bulk carriers
• INCOTERMS
Currency and payment issues
• Currency and Exchange rates
• Methods and terms of payment-L/C,
direct and others
• Hedging and currency risk
management- forward & option currency contacts
• Insurance and in-transit risk
management-Clause A,B & C
 Counter Trade
• What is Counter trade- Part of full payment by goods
instead of money
• Barter- Goods exchanged for goods, no money involved
• Offset –Cash/Goods Swiss buy F-16, sell Elevators to USA
• Counter purchase- Buy & sell products in local currency
Russian example
• Buy back/compensation- Seller of Capital goods
accepts part of payment by products manufactured by their machines
• Advantages of CT: circumvent currency controls, restricted
currency areas, Cash short countries
• Disadvantages of CT: ???
Political and Economic Alliances
• EU- European Union , Euro Currency
• NAFTA- North American Free Trade Agreement
• Mercosur- Argentina, Brazil., Paraguay, Uruguay; Chile, Bolvia
• ASEAN- Association of South Asian Nations
Indonesia, Malaysia, the Philippines, Myanmar, Singapore, Thailand
Brunei, Laos, Burma, Cambodia and Vietnam
• APEC- 21 Countries (Asia Pacific Economic Cooperation)-large area, 45% of
world GDP; China, Russia, Canada, USA, Australia
• SAARC- South Asian Association for Regional Cooperation-created
in1985; India, Pakistan, Bangladesh, Shri Lanka, Nepal, Bhutan and
Maldives
• SAFTA - South Asian Free trade agreement(2013)
• OPEC (Organization of Petroleum Exporting Countries) Role in 1970’s-
Fixing prices & production quotas-Crude prices $3/ to $12: now $60 per barrel
 Methods of Entry in Foreign
Export Markets
• Indirect Exporting
– Export Trading Company
– Export Management Corporation
– Piggy- Backing

• Active Exporting
– Agents
– Distributor
– Marketing Subsidiary
– Coordinating Direct Export Strategy
– Foreign Sales Corporation
 Entering in Production Abroad
• Contract Manufacturing
• Licensing
• Franchising
• Joint Venture
• Subsidiary
Some Useful websites
 Reading References
• World Class Supply Chain by Burt, Dobler
& Starling- Chapter 16
• Global Supply Chain Management by
Douglas Long Chapters 10,11 &12