Introduction to
International
Operations
Management
Dr. Cem Canel
Office: CIS Building, 2016
Phone (office): 962-3816
Email: canelc@uncw.edu
POPULATION OF MINI WORLD
If we could shrink the world’s population to a village of
100, with people and nations remaining the same, below
is how we would look …
There would be:
•57 from Asia
•21 from Europe
•14 from Western Hemisphere (North & South America)
• 8 from Africa
•95 would live outside the U.S.
•70 would be Non-White; 30 would be White
•70 would be Non-Christian
•50% of world’s wealth in hands of 6 people – all from the U.S.
•70 unable to read
•50 suffer from malnutrition
•80 live in substandard conditions
• 1 of 100 has a university education
BUSINESS ENVIRONMENT
Operations
Finance
Accounting
Information
Systems
•Improvement of
•The
application
•Org.
Behavior
•The
study
of
•Sales
•Bookkeeping
organizational
•Nceufhkurreffg
•Investments
of people,
how
the forces
of
•Policy
•Promotion
activities
to
•Pensions
•Capital
technologies,
supply
and
•Strategy
ensure
quality,
•Research
•Audits
•Stock
Market
and
procedures
demand
allocate
customer
Behavior
to solve
business
scarce
resources
satisfaction
, and
problems
loyalty
Marketing
Management
Economics
WHY GO GLOBAL?
Reduce costs
Improve supply chain
Provide better goods and
services
Attract new markets
Learn to improve operations
Attract and retain global talent
SPECIFIC DRIVERS OF GLOBALIZATION
Political
forces
• Reduction of barriers to trade and foreign investment by
governments
• Privatization of former communist nations
• Porous borders between countries
Technology
forces
• Innovations in computers, information technology,
communications technology (Internet, networking), and
transportation
Market forces
• The globalization of financial markets;
• Globalizing companies become global customers
Cost forces
• Goal for economies of scale to reduce unit costs
• The creation of a global labor force
• Rapidly falling freight costs
Competitive
forces
• Increase in intensity due to explosive growth in international
business
INTERNATIONAL ENVIRONMENT
Environment
All the forces influencing the life and development
of the firm
Forces
External Forces (Uncontrollable) – Forces over
which management has no direct control
Internal Forces (Controllable) – Forces that
management can use to adapt to external forces
The International
Environment
Political:
Governments
Ideology
Stability
Civil Strife
Economic:
Cultural:
Trade Agreements
Trading Blocs
GNP/Wages
Inflation
Customs
Values
Language
Religion
The
International
Company
Legal:
Infrastructure:
International Law
Host Country Laws
Home Laws
International Piracy
Communications
Internet
Transportation
Technology
EXTERNAL FORCES
Uncontrollable External Forces: Forces over which
management has no direct control
Competitive
Competition (kind, number, location) in other countries
Distributive
Distribution channel forces for distributing goods and services
Economic
Economic infrastructure: GNP, unit labor cost, personal consumption
expenditure
Socioeconomic
Characteristics of human population (market demographics)
Financial
Capital markets: interest rates, inflation rates, taxation
Legal
Laws governing how international firms must operate, e.g., property rights
Physical
Topography: climate, and natural resources
Political
Forms of government, international organizations; nationalism, political risk
Sociocultural
Language, values, attitudes, beliefs, and opinions
Labor
Quantity, quality of skills, attitudes of labor
Technology
Modern or primitive equipment and skills that affect how resources are
converted to products
INTERNAL FORCES
Internal Forces (Controllable) – Forces that management
can use to adapt to external forces
Factors of
Production
Capital, raw materials, and people
Activities of the Personnel, finance, production, and
organization
marketing
Multi-national Companies…
US Factory
US DC
Americas Demand
European DC
European Demand
US Suppliers
Singapore Factory
Off Shore Suppliers
Kit Suppliers
Asia/Pacific DC
Asia/Pacific Demand
TYPES OF INTERNATIONAL OM DECISIONS
Strategic
- long term, often involving acquiring new
resources
- e.g., power station construction (at electric
utility)
Tactical
- medium term, utilization of existing resources
- e.g., workforce commitments
Operational
- short term, execution of schedules or control
activities
- e.g., shift scheduling (in a hospital)
Forecasting demands in different cities around the world
RESPONSIBILITY FOR QUALITY
Customer
Marketing
Service
Quality
Product
Or
Service
Packaging and
Storage
Inspection
and Test
Design
Engineering
Procurement
Production
Process
Design
WHERE WOULD YOU LOCATE…
An amusement park?
A new pharmacy?
Amazon’s new distribution center?
FACTORS TO CONSIDER…
Distances to surrounding commu
Patient traffic?
An amusement park in ALASKA?
Length of summer season?
Sufficient population?
Quantity of labor?
Labor costs?
Local laws?
A new pharmacy?
Distances from online customer
Transportation costs?
Unions?
Taxes?
Dabur’s new distribution center?
IOM Decisions
Where to locate franchises?
AIRPORTS IN DIFFERENT
CITIES AROUND THE
WORLD
GLOBAL SUPPLY CHAIN MANAGEMENT
Involves total systems approach to
managing flow of
Materials
Information
Finances
Services
Global Supply-Chains
GLOBAL SOURCING
Considerations
Costs
Control
Expertise
Distance
Languages
Laws and regulations
GLOBAL SOURCING
The Lure of Global Sourcing
•Suppliers with improved
competitiveness
Cost
Quality
Timeliness
•Suppliers in less developed
countries (LDC) with low-cost
labor
Attractive for labor-intensive
products with low skill
requirements
FORD’S GLOBAL NETWORK TO SUPPORT THE MANUFACTURING
OF THE ESCORT
LOGISTICS
Movement of materials
Must interface with
sourcing ,
manufacturing,
design, engineering
and marketing
– Packaging and transportation
requirements can greatly increase
logistics costs
– Many companies outsource logistics
Container Ships
Are Getting Larger
WHY IS INTERNATIONAL OPERATIONS DIFFERENT?
Domestic
Environment
Foreign
Environment
• All the uncontrollable
• All the uncontrollable
forces are in the home
forces that originate
country that surround
outside the home
and influence the firm’s country that surround
life and development
and influence the firm
have
•different values
•difficult to assess
•Interrelated
International
Environment
• Interaction between
domestic and foreign
environmental forces
or between sets of
foreign environmental
forces
Key Point: Increased complexity for decision-making
GLOBALIZATION IS THE FUTURE AND CANNOT
HAPPEN WITHOUT INTERNATIONAL OPERATIONS
http://www.michaelhartzell.com/videosthat-rock/did-you-know--video-by-karlfisch-scott-mcleod-and-jeff-bronman/