Operations Strategy in a Global Environment

Operations Strategy in a Global Environment

Operations Management Chapter 2 Operations Strategy in a Global Environment PowerPoint presentation to accompany Heizer/Render Principles of Operations Management, 7e Operations Management, 9e 2008 Prentice Hall, Inc. 21 Outline Global Company Profile: Boeing A Global View of Operations Cultural and Ethical Issues Developing Missions And Strategies Mission Strategy 2008 Prentice Hall, Inc. 22 Outline Continued Achieving Competitive Advantage

Through Operations Competing On Differentiation Competing On Cost Competing On Response Ten Strategic OM Decisions 2008 Prentice Hall, Inc. 23 Outline Continued Issues In Operations Strategy Research Preconditions Dynamics 2008 Prentice Hall, Inc. 24 Outline Continued Strategy Development and Implementation Critical Success Factors and Core Competencies Build and Staff the Organization Integrate OM with Other Activities

2008 Prentice Hall, Inc. 25 Outline Continued Global Operations Strategy Options International Strategy Multidomestic Strategy Global Strategy Transnational Strategy 2008 Prentice Hall, Inc. 26 Learning Objectives When you complete this chapter you should be able to: 1. Define mission and strategy 2. Identify and explain three strategic approaches to competitive advantage 3. Identify and define the 10 decisions of operations management 2008 Prentice Hall, Inc. 27

Learning Objectives When you complete this chapter you should be able to: 4. Identify five OM strategy insights provided by PIMS research 5. Identify and explain four global operations strategy options 2008 Prentice Hall, Inc. 28 Global Strategies Boeing sales and production are worldwide Benetton moves inventory to stores around the world faster than its competition by building flexibility into design, production, and distribution Sony purchases components from suppliers in Thailand, Malaysia, and around the world 2008 Prentice Hall, Inc. 29 Global Strategies Volvo considered a Swedish company

but it is controlled by an American company, Ford. The current Volvo S40 is built in Belgium and shares its platform with the Mazda 3 built in Japan and the Ford Focus built in Europe. Haier A Chinese company, produces compact refrigerators (it has one-third of the US market) and wine cabinets (it has half of the US market) in South Carolina 2008 Prentice Hall, Inc. 2 10 Some Multinational Corporations Home Country % Sales Outside Home Country % Assets Outside Home Country % Foreign

Workforce Citicorp USA 34 46 NA ColgatePalmolive USA 72 63 NA Dow Chemical USA 60

50 NA Gillette USA 62 53 NA Honda Japan 63 36 NA USA 57 47

51 Company IBM 2008 Prentice Hall, Inc. 2 11 Some Multinational Corporations Home Country % Sales Outside Home Country % Assets Outside Home Country % Foreign Workforce Britain

78 50 NA Switzerland 98 95 97 Philips Netherlands Electronics 94 85 82 Siemens Germany

51 NA 38 Unilever Britain & Netherlands 95 70 64 Company ICI Nestle 2008 Prentice Hall, Inc. 2 12 Some Boeing Suppliers (787) Firm Latecoere Labinel

Dassault Country France France France Messier-Bugatti Thales France France Messier-Dowty Diehl France Germany 2008 Prentice Hall, Inc. Component Passenger doors Wiring Design and PLM software Electric brakes Electrical power conversion system

and integrated standby flight display Landing gear structure Interior lighting 2 13 Some Boeing Suppliers (787) Firm Cobham Rolls-Royce Smiths Aerospace Country UK UK UK BAE SYSTEMS Alenia Aeronautics UK Italy Toray Industries Japan 2008 Prentice Hall, Inc.

Component Fuel pumps and valves Engines Central computer system Electronics Upper center fuselage & horizontal stabilizer Carbon fiber for wing and tail units 2 14 Some Boeing Suppliers (787) Firm Fuji Heavy Industries Kawasaki Heavy Industries Country Japan Component Center wing box Japan Teijin Seiki

Mitsubishi Heavy Industries Chengdu Aircraft Group Hafei Aviation Japan Japan Forward fuselage, fixed section of wing, landing gear well Hydraulic actuators Wing box China Rudder China Parts 2008 Prentice Hall, Inc. 2 15 Some Boeing Suppliers (787) Firm

Korean Aviation Saab 2008 Prentice Hall, Inc. Country South Korea Sweden Component Wingtips Cargo access doors 2 16 Reasons to Globalize Reasons to Globalize Tangible 1. Reduce costs (labor, taxes, tariffs, etc.) Reasons 2. Improve supply chain 3. Provide better goods and services 4. Understand markets Intangible 5. Learn to improve operations Reasons 6. Attract and retain global talent 2008 Prentice Hall, Inc. 2 17

Reduce Costs Foreign locations with lower wage rates can lower direct and indirect costs Maquiladoras World Trade Organization (WTO) North American Free Trade Agreement (NAFTA) APEC, SEATO, MERCOSUR European Union (EU) 2008 Prentice Hall, Inc. 2 18 Improve the Supply Chain Locating facilities closer to unique resources Auto design to California Athletic shoe production to China Perfume manufacturing in France 2008 Prentice Hall, Inc. 2 19 Provide Better Goods and Services Objective and subjective characteristics of goods and

services On-time deliveries Cultural variables Improved customer service 2008 Prentice Hall, Inc. 2 20 Understand Markets Interacting with foreign customers and suppliers can lead to new opportunities Cell phone design from Europe Cell phone fads from Japan Extend the product life cycle 2008 Prentice Hall, Inc. 2 21 Learn to Improve Operations Remain open to the free flow of ideas General Motors partnered with a Japanese auto manufacturer to

learn Equipment and layout have been improved using Scandinavian ergonomic competence 2008 Prentice Hall, Inc. 2 22 Attract and Retain Global Talent Offer better employment opportunities Better growth opportunities and insulation against unemployment Relocate unneeded personnel to more prosperous locations Incentives for people who like to travel 2008 Prentice Hall, Inc. 2 23 Cultural and Ethical Issues Cultures can be quite different Attitudes can be quite different towards 2008 Prentice Hall, Inc.

Punctuality Lunch breaks Thievery Bribery Environment Intellectual property Child labor 2 24 You May Wish To Consider National literacy rate Rate of innovation Work ethic Rate of technology change Number of skilled workers Political stability Inflation

Product liability laws Export restrictions Number of miles of highway Phone system Variations in language 2008 Prentice Hall, Inc. Tax rates Availability of raw materials Interest rates Population 2 25 Match Product & Parent Braun Household Appliances Firestone Tires Godiva Chocolate Haagen-Dazs Ice Cream Jaguar Autos MGM Movies Lamborghini Autos Alpo Petfoods

2008 Prentice Hall, Inc. 1. Volkswagen 2. Bridgestone 3. Campbell Soup 4. Ford Motor Company 5. Gillette 6. Nestl 7. Pillsbury 8. Sony 2 26 Match Product & Parent Braun Household Appliances Firestone Tires Godiva Chocolate Haagen-Dazs Ice Cream Jaguar Autos MGM Movies Lamborghini Autos Alpo Petfoods 2008 Prentice Hall, Inc. 1. Volkswagen 2. Bridgestone 3. Campbell Soup

4. Ford Motor Company 5. Gillette 6. Nestl 7. Pillsbury 8. Sony 2 27 Match Product & Country Braun Household Appliances Firestone Tires 1. Great Britain Godiva Chocolate 2. Germany Haagen-Daz Ice Cream Jaguar Autos 3. Japan MGM Movies 4. United States 5. Switzerland

Lamborghini Autos Alpo Pet Foods 2008 Prentice Hall, Inc. 2 28 Match Product & Country Braun Household Appliances Firestone Tires 1. Great Britain Godiva Chocolate 2. Germany Haagen-Daz Ice Cream Jaguar Autos 3. Japan MGM Movies 4. United States 5. Switzerland

Lamborghini Autos Alpo Pet Foods 2008 Prentice Hall, Inc. 2 29 Developing Missions and Strategies Mission statements tell an organization where it is going The Strategy tells the organization how to get there 2008 Prentice Hall, Inc. 2 30 Mission Mission - where are you going? Organizations purpose for being Answers What do we provide society? Provides boundaries and focus 2008 Prentice Hall, Inc.

2 31 FedEx FedEx is committed to our People-Service-Profit philosophy. We will produce outstanding financial returns by providing total reliable, competitively superior, global air-ground transportation of high priority goods and documents that require rapid, time-certain delivery. Equally important, positive control of each package will be maintained using real time electronic tracking and tracing systems. A complete record of each shipment and delivery will be presented with our request for payment. We will be helpful, courteous, and professional to each other and the public. We will strive to have a completely satisfied customer at the end of each transaction. Figure 2.2 2008 Prentice Hall, Inc. 2 32 Merck The mission of Merck is to provide society with superior products and services - innovations and solutions that improve the quality of life and satisfy customer needs - to provide employees with meaningful work and advancement opportunities and

investors with a superior rate of return Figure 2.2 2008 Prentice Hall, Inc. 2 33 Hard Rock Cafe Our Mission: To spread the spirit of Rock n Roll by delivering an exceptional entertainment and dining experience. We are committed to being an important, contributing member of our community and offering the Hard Rock family a fun, healthy, and nurturing work environment while ensuring our long-term success. Figure 2.2 2008 Prentice Hall, Inc. 2 34 Arnold Palmer Hospital Arnold Palmer Hospital is a healing environment providing family-centered care with compassion, comfort and respect when it matters the most. Figure 2.2

2008 Prentice Hall, Inc. 2 35 Factors Affecting Mission Philosophy and Values Profitability and Growth Environment Mission Customers Public Image Benefit to Society 2008 Prentice Hall, Inc. 2 36 Sample Missions Sample Company Mission To manufacture and service an innovative, growing, and profitable worldwide microwave communications business that exceeds our customers expectations. Sample Operations Management Mission

To produce products consistent with the companys mission as the worldwide low-cost manufacturer. Figure 2.3 2008 Prentice Hall, Inc. 2 37 Sample Missions Sample OM Department Missions Product design To design and produce products and services with outstanding quality and inherent customer value. Quality management To attain the exceptional value that is consistent with our company mission and marketing objectives by close attention to design, procurement, production, and field service operations Process design To determine and design or produce the production process and equipment that will be compatible with low-cost product, high

quality, and good quality of work life at economical cost. Figure 2.3 2008 Prentice Hall, Inc. 2 38 Sample Missions Sample OM Department Missions Location To locate, design, and build efficient and economical facilities that will yield high value to the company, its employees, and the community. Layout design To achieve, through skill, imagination, and resourcefulness in layout and work methods, production effectiveness and efficiency while supporting a high quality of work life. Human resources To provide a good quality of work life, with well-designed, safe, rewarding jobs, stable employment, and equitable pay, in exchange

for outstanding individual contribution from employees at all levels. Figure 2.3 2008 Prentice Hall, Inc. 2 39 Sample Missions Sample OM Department Missions Supply chain management To collaborate with suppliers to develop innovative products from stable, effective, and efficient sources of supply. Inventory To achieve low investment in inventory consistent with high customer service levels and high facility utilization. Scheduling To achieve high levels of throughput and timely customer delivery through effective scheduling.

Maintenance To achieve high utilization of facilities and equipment by effective preventive maintenance and prompt repair of facilities and equipment. Figure 2.3 2008 Prentice Hall, Inc. 2 40 Strategic Process Organizations Mission Functional Area Missions Marketing 2008 Prentice Hall, Inc. Operations Finance/ Accounting 2 41 Strategy

Action plan to achieve mission Functional areas have strategies Strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses 2008 Prentice Hall, Inc. 2 42 Strategies for Competitive Advantage Differentiation better, or at least different Cost leadership cheaper Response rapid response 2008 Prentice Hall, Inc. 2 43 Competing on Differentiation Uniqueness can go beyond both the physical characteristics and service attributes to encompass everything

that impacts customers perception of value Safeskin gloves leading edge products Walt Disney Magic Kingdom experience differentiation Hard Rock Cafe dining experience 2008 Prentice Hall, Inc. 2 44 Competing on Cost Provide the maximum value as perceived by customer. Does not imply low quality. Southwest Airlines secondary airports, no frills service, efficient utilization of equipment Wal-Mart small overheads, shrinkage, distribution costs Franz Colruyt no bags, low light, no music, doors on freezers 2008 Prentice Hall, Inc. 2 45 Competing on Response Flexibility is matching market changes in design innovation and volumes Institutionalization at Hewlett-Packard

Reliability is meeting schedules German machine industry Timeliness is quickness in design, production, and delivery Johnson Electric, Bennigans, Motorola 2008 Prentice Hall, Inc. 2 46 OMs Contribution to Strategy Operations Decisions Product Quality Process Examples Specific Strategy Used Competitive Advantage FLEXIBILITY:

Sonys constant innovation of new products....Design HPs ability to lead the printer marketVolume Southwest Airlines No-frills service....LOW COST Location Layout Human resource Supply chain Inventory Scheduling Maintenance 2008 Prentice Hall, Inc. DELIVERY: Pizza Huts 5-minute guarantee at lunchtime.....Speed Federal Expresss absolutely, positively on time...Dependability QUALITY: Motorolas HDTV converters.........Conformance Motorolas pagers...Performance Caterpillars after-sale service on heavy equipment....AFTER-SALE SERVICE Differentiation

(Better) Response (Faster) Cost leadership (Cheaper) Fidelity Securitys broad line of mutual funds.BROAD PRODUCT LINE Figure 2.4 2 47 10 Strategic OM Decisions 1. Goods and service design 2. Quality 3. Process and capacity design 4. Location selection 5. Layout design 2008 Prentice Hall, Inc. 6. Human resources and job design 7. Supply chain

management 8. Inventory 9. Scheduling 10. Maintenance 2 48 Goods and Services and the 10 OM Decisions Operations Decisions Goods and service design Services Goods Product is usually Product is not tangible tangible Quality Many objective standards Many subjective standards

Process and capacity design Customers not involved Customer may be directly involved Capacity must match demand Table 2.1 2008 Prentice Hall, Inc. 2 49 Goods and Services and the 10 OM Decisions Operations Decisions Location selection Goods Near raw materials and labor

Services Near customers Layout design Production efficiency Enhances product and production Human resources and job design Technical skills, consistent labor standards, output based wages Interact with customers, labor standards vary Table 2.1 2008 Prentice Hall, Inc.

2 50 Goods and Services and the 10 OM Decisions Operations Decisions Supply chain Goods Relationship critical to final product Services Important, but may not be critical Inventory Raw materials, work-in-process, and finished goods may be held Cannot be stored

Scheduling Level schedules possible Meet immediate customer demand Table 2.1 2008 Prentice Hall, Inc. 2 51 Goods and Services and the 10 OM Decisions Operations Services Decisions Goods Maintenance Often preventive Often repair and and takes place takes place at at production site customers site Table 2.1 2008 Prentice Hall, Inc. 2 52

Managing Global Service Operations Requires a different perspective on: Capacity planning Location planning Facilities design and layout Scheduling 2008 Prentice Hall, Inc. 2 53 Process Design Variety of Products High Moderate Process-focused JOB SHOPS (Print shop, emergency room, machine shop, fine-dining Repetitive (modular) restaurant) focus ASSEMBLY LINE

(Cars, appliances, TVs, fast-food restaurants) Mass Customization Customization at high Volume (Dell Computers PC, cafeteria) Product focused CONTINUOUS (steel, beer, paper, bread, institutional kitchen) Low Low 2008 Prentice Hall, Inc. Moderate Volume High 2 54 Operations Strategies for Two Drug Companies Brand Name Drugs, Inc.

Generic Drug Corp. Competitive Advantage Product Differentiation Low Cost Product Selection and Design Heavy R&D investment; extensive labs; focus on development in a broad range of drug categories Low R&D investment; focus on development of generic drugs Quality Major priority, exceed regulatory requirements

Meets regulatory requirements on a country by country basis Table 2.2 2008 Prentice Hall, Inc. 2 55 Operations Strategies for Two Drug Companies Brand Name Drugs, Inc. Generic Drug Corp. Product Differentiation Low Cost Process Product and modular process; long production runs in specialized facilities; build capacity ahead of demand

Process focused; general processes; job shop approach, shortrun production; focus on high utilization Location Still located in the city where it was founded Recently moved to lowtax, low-labor-cost environment Competitive Advantage Table 2.2 2008 Prentice Hall, Inc. 2 56 Operations Strategies for Two Drug Companies Competitive Advantage Brand Name Drugs, Inc. Generic Drug Corp.

Product Differentiation Low Cost Scheduling Centralized production planning Many short-run products complicate scheduling Layout Layout supports automated productfocused production Layout supports process-focused job shop practices Table 2.2 2008 Prentice Hall, Inc. 2 57 Operations Strategies for

Two Drug Companies Competitive Advantage Human Resources Brand Name Drugs, Inc. Generic Drug Corp. Product Differentiation Low Cost Hire the best; nationwide searches Supply Chain Long-term supplier relationships Very experienced top executives; other personnel paid below industry average Tends to purchase competitively to find bargains Table 2.2

2008 Prentice Hall, Inc. 2 58 Operations Strategies for Two Drug Companies Competitive Advantage Brand Name Drugs, Inc. Generic Drug Corp. Product Differentiation Low Cost Inventory High finished goods inventory to ensure all demands are met Process focus drives up work-in-process inventory; finished goods inventory tends to be low

Maintenance Highly trained staff; extensive parts inventory Highly trained staff to meet changing demand Table 2.2 2008 Prentice Hall, Inc. 2 59 Issues In Operations Strategy Research about effective operations management strategies Preconditions for developing effective OM strategies The dynamics of OM strategy development 2008 Prentice Hall, Inc. 2 60 Characteristics of High ROI Firms

High product quality High capacity utilization High operating efficiency Low investment intensity Low direct cost per unit From the PIMS program of the Strategic Planning Institute 2008 Prentice Hall, Inc. 2 61 Strategic Options to Gain a Competitive Advantage 28% - Operations Management 18% - Marketing/distribution 17% - Momentum/name recognition 16% - Quality/service 14% - Good management 4% - Financial resources 3% - Other 2008 Prentice Hall, Inc. 2 62 Elements of Operations Management Strategy Low-cost product Product-line breadth Technical superiority

Product characteristics/differentiation Continuing product innovation Low-price/high-value offerings Efficient, flexible operations adaptable to consumers Engineering research development Location Scheduling 2008 Prentice Hall, Inc. 2 63 Preconditions One must understand: Strengths and weaknesses of competitors and possible new entrants into the market Current and prospective environmental, technological, legal, and economic issues The product life cycle Resources available within the firm and within the OM function

Integration of OM strategy with companys strategy and with other functional areas 2008 Prentice Hall, Inc. 2 64 Dynamics of Strategic Change Changes within the organization Personnel Finance Technology Product life Changes in the environment 2008 Prentice Hall, Inc. 2 65 Product Life Cycle Company Strategy/Issues Introduction

Growth Maturity Best period to increase market share Practical to change price or quality image Poor time to change image, price, or quality R&D engineering is critical Strengthen niche Competitive costs become critical Defend market position Internet search engines LCD & plasma TVs

Sales Drive-through restaurants Decline Cost control critical CD-ROMs Analog TVs iPods Xbox 360 3 1/2 Floppy disks Figure 2.5 2008 Prentice Hall, Inc. 2 66 OM Strategy/Issues Product Life Cycle Introduction

Growth Maturity Decline Product design and development critical Frequent product and process design changes Short production runs High production costs Limited models Forecasting critical Product and process reliability Competitive product improvements and options

Increase capacity Standardization Less rapid product changes more minor changes Optimum capacity Increasing stability of process Long production runs Product improvement and cost cutting Little product differentiation Cost minimization Overcapacity in the industry Prune line to eliminate items not returning

good margin Reduce capacity Attention to quality Shift toward product focus Enhance distribution Figure 2.5 2008 Prentice Hall, Inc. 2 67 SWOT Analysis Mission Internal Strengths External Opportunities Analysis Internal Weaknesses

External Threats Strategy 2008 Prentice Hall, Inc. 2 68 Strategy Development Process Environmental Analysis Identify the strengths, weaknesses, opportunities, and threats. Understand the environment, customers, industry, and competitors. Determine Corporate Mission State the reason for the firms 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, aftersale service, broad product lines. 2008 Prentice Hall, Inc. Figure 2.6 2 69 Strategy Development and Implementation Identify critical success factors

Build and staff the organization Integrate OM with other activities The operations managers job is to implement an OM strategy, provide competitive advantage, and increase productivity 2008 Prentice Hall, Inc. 2 70 Critical Success Factors Marketing Service Distribution Promotion Channels of distribution Product positioning (image, functions) Finance/Accounting Production/Operations Leverage Cost of capital Working capital Receivables Payables Financial control Lines of credit

Decisions Sample Options Chapter Product Quality Process Location Layout Human resource Supply chain Inventory Schedule Maintenance Customized, or standardized Define customer expectations and how to achieve them Facility size, technology, capacity Near supplier or near customer Work cells or assembly line Specialized or enriched jobs Single or multiple suppliers When to reorder, how much to keep on hand Stable or fluctuating production rate Repair as required or preventive maintenance

5 6, S6 7, S7 8 9 10, S10 11, S11 12, 14, 16 13, 15 17 2008 Prentice Hall, Inc. Figure 2.7 2 71 Activity Mapping Courteous, but Limited Passenger Service Lean, Productive Employees Short Haul, Point-toPoint Routes, Often to Secondary Airports Competitive Advantage:

Low Cost High Aircraft Utilization Standardized Fleet of Boeing 737 Aircraft Frequent, Reliable Schedules Figure 2.8 2008 Prentice Hall, Inc. 2 72 Activity Mapping Courteous, but Limited Passenger Service Lean, Productive Employees Short Haul, Point-toPoint Routes, Often to Secondary Airports

Automated ticketing machines Competitive Advantage: No seat assignments Low Cost No baggage transfers High Aircraft Utilization No meals (peanuts) Standardized Fleet of Boeing 737 Aircraft Frequent, Reliable Schedules Figure 2.8 2008 Prentice Hall, Inc. 2 73 Activity Mapping Courteous, but Limited Passenger Service

No meals (peanuts) Lean, Lower gate costs at Productive secondary airports Employees Short Haul, Point-toPoint Routes, Often to Secondary Airports High number of flights Competitive Advantage: reduces employee idle time Low Cost between flights High Aircraft Utilization Standardized Fleet of Boeing 737 Aircraft

Frequent, Reliable Schedules Figure 2.8 2008 Prentice Hall, Inc. 2 74 Activity Mapping Courteous, but High number of flights Limited Passenger reduces employee idle time Service between flights Lean, Saturate a city with flights, Productive lowering administrative Employees Short Haul, Point-toPoint Routes, Often to Secondary Airports costs (advertising, HR, etc.)

Competitive Advantage: per passenger for that city Low Cost Pilot training required on Highonly one type of aircraft Aircraft Reduced Utilization maintenance Standardized inventory required because Fleet of Boeing of only one type ofAircraft aircraft 737 Frequent, Reliable Schedules Figure 2.8

2008 Prentice Hall, Inc. 2 75 Activity Mapping Pilot training required on Courteous, butaircraft onlyLimited one type of Passenger Service Reduced maintenance inventory required because Lean, Short Haul, Point-toProductive of only one type of aircraft Point Routes, Often to Employees Secondary Airports Excellent supplier relations with Boeing has aided Competitive Advantage: financing

Low Cost High Aircraft Utilization Standardized Fleet of Boeing 737 Aircraft Frequent, Reliable Schedules Figure 2.8 2008 Prentice Hall, Inc. 2 76 Activity Mapping Courteous, but Limited Passenger Reduced maintenance Service Lean, Productive Employees

Flexible union inventory required because of only one type of aircraft Short Haul, Point-to- Point Routes, Often to Flexible employeesSecondary and Airports standard planes aid contracts Competitive Advantage: scheduling Low Cost Maintenance personnel trained only one type of Frequent, High Aircraft Reliable aircraft Utilization Standardized 20-minute

gate Fleet of Boeing 737 Aircraft Schedules turnarounds Figure 2.8 2008 Prentice Hall, Inc. 2 77 Activity Mapping Automated ticketing Courteous, but machines Limited Passenger Service Empowered employees Lean, Productive Employees High Aircraft

Utilization High employee Short Haul, Point-toPoint Routes, Often to compensation Secondary Airports Hire for attitude, then train Competitive Advantage: High level of stock Low Cost ownership High number of flightsFrequent, Reliable reduces employee idle time Schedules Standardized Fleetbetween of Boeing flights 737 Aircraft Figure 2.8 2008 Prentice Hall, Inc. 2 78

High Four International Operations Strategies International Strategy Cost Reduction Considerations Import/export or license existing product Examples U.S. Steel Harley Davidson Low Low High Local Responsiveness Considerations 2008 Prentice Hall, Inc. (Quick Response and/or Differentiation) 2 79

Four International Operations Strategies Cost Reduction Considerations High International Strategy Import/export or license existing product Examples U.S. Steel Harley Davidson Low Low High Local Responsiveness Considerations 2008 Prentice Hall, Inc. (Quick Response and/or Differentiation) 2 80 Four International Global

Operations Strategies Strategy High Cost Reduction Considerations Standardized product Economies of scale Cross-cultural learning Examples Texas Instruments Examples Caterpillar U.S. Steel Otis Elevator Harley Davidson International Strategy Import/export or license existing product Low Low High Local Responsiveness Considerations

2008 Prentice Hall, Inc. (Quick Response and/or Differentiation) 2 81 Four International Operations Strategies High Global Strategy Cost Reduction Considerations Standardized product Economies of scale Cross-cultural learning Examples Texas Instruments Caterpillar Otis Elevator International Strategy Import/export or license existing product Examples U.S. Steel Harley Davidson

Low Low High Local Responsiveness Considerations 2008 Prentice Hall, Inc. (Quick Response and/or Differentiation) 2 82 FourMultidomestic International Operations Strategies Strategy High Use existing Standardized product model Economies ofdomestic scale Cross-cultural learning globally Examples Franchise, joint

Texas Instruments Caterpillar Otis Elevatorventures, subsidiaries Cost Reduction Considerations Global Strategy International Strategy Examples Heinz Examples McDonalds U.S. Steel Harley Davidson The Body Shop Hard Rock Cafe Import/export or license existing product Low Low High Local Responsiveness Considerations 2008 Prentice Hall, Inc.

(Quick Response and/or Differentiation) 2 83 Four International Operations Strategies High Global Strategy Cost Reduction Considerations Standardized product Economies of scale Cross-cultural learning Examples Texas Instruments Caterpillar Otis Elevator International Strategy Import/export or license existing product Multidomestic Strategy Use existing domestic model globally Franchise, joint ventures,

subsidiaries Examples U.S. Steel Harley Davidson Examples Heinz The Body Shop McDonalds Hard Rock Cafe Low Low High Local Responsiveness Considerations 2008 Prentice Hall, Inc. (Quick Response and/or Differentiation) 2 84 Four International Transnational Operations Strategies Strategy

High Move material, people, ideas Examples across national Texas Instruments Caterpillar boundaries Otis Elevator Economies of scale Cross-cultural International Strategy Multidomestic Strategy Use existing learning Import/export or domestic model globally Global Strategy Cost Reduction Considerations Standardized product Economies of scale Cross-cultural learning license existing product

Examples Coca-Cola Nestl Examples U.S. Steel Harley Davidson Low Franchise, joint ventures, subsidiaries Examples Heinz The Body Shop McDonalds Hard Rock Cafe Low High Local Responsiveness Considerations 2008 Prentice Hall, Inc. (Quick Response and/or Differentiation) 2 85 Four International

Operations Strategies High Global Strategy Cost Reduction Considerations Standardized product Economies of scale Cross-cultural learning Examples Texas Instruments Caterpillar Otis Elevator International Strategy Transnational Strategy Move material, people, ideas across national boundaries Economies of scale Cross-cultural learning Examples Coca-Cola Nestl Import/export or license existing product

Multidomestic Strategy Use existing domestic model globally Franchise, joint ventures, subsidiaries Examples U.S. Steel Harley Davidson Examples Heinz The Body Shop McDonalds Hard Rock Cafe Low Low High Local Responsiveness Considerations 2008 Prentice Hall, Inc. (Quick Response and/or Differentiation) 2 86 Ranking Corruption Rank

1 1 1 5 7 11 14 15 16 17 20 34 70 121 Country 2006 CPI Score (out of 10) Finland 9.6 Least Corrupt Iceland 9.6 New Zealand 9.6 Singapore 9.4 Switzerland 9.1

UK 8.6 Canada 8.5 Hong Kong 8.3 Germany 8.0 Japan 7.6 USA, Belgium 7.3 Israel, Taiwan 5.9 Most Brazil, China, Mexico 3.3 Corrupt Russia 2.5 Table 8.2 2008 Prentice Hall, Inc. 2 87

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