Operations Management Chapter 2 Operations Strategy in

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Operations Management Chapter 2 – Operations Strategy in a Global Environment Power. Point presentation to accompany Heizer/Render Principles of Operations Management, 7 e Operations Management, 9 e © 2008 Prentice Hall, Inc. 2–

Outline – Continued þ Achieving Competitive Advantage Through Operations þ Competing On Differentiation þ Competing On Cost þ Competing On Response þ Ten Strategic OM Decisions © 2008 Prentice Hall, Inc. 2– 3

Outline – Continued þ Strategy Development and Implementation þ Critical Success Factors and Core Competencies þ Build and Staff the Organization þ Integrate OM with Other Activities © 2008 Prentice Hall, Inc. 2– 5

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. 2– 7

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. 2– 8

Global Strategies þ Boeing – sales and production are worldwide þ Benetton – moves inventory to stores around the world faster than its competition by building flexibility into design, production, and distribution þ Sony – purchases components from suppliers in Thailand, Malaysia, and around the world © 2008 Prentice Hall, Inc. 2– 9

Global Strategies þ Volvo – considered a Swedish company but it is controlled by an American company, Ford. The current Volvo S 40 is built in Belgium and shares its platform with the Mazda 3 built in Japan and the Ford Focus built in Europe. þ 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 Colgate. Palmolive 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 Messier-Bugatti Thales 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 Forward fuselage, fixed section of wing, landing gear well Hydraulic actuators Wing box China Rudder China Parts © 2008 Prentice Hall, Inc. 2 – 15

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–

Reduce Costs þ Foreign locations with lower wage rates can lower direct and indirect costs þ Maquiladoras þ World Trade Organization (WTO) þ North American Free Trade Agreement (NAFTA) þ APEC, SEATO, MERCOSUR þ European Union (EU) © 2008 Prentice Hall, Inc. 2 – 18

Improve the Supply Chain þ Locating facilities closer to unique resources þ Auto design to California þ Athletic shoe production to China þ Perfume manufacturing in France © 2008 Prentice Hall, Inc. 2 – 19

Provide Better Goods and Services þ Objective and subjective characteristics of goods and services þ On-time deliveries þ Cultural variables þ Improved customer service © 2008 Prentice Hall, Inc. 2 – 20

Understand Markets þ Interacting with foreign customers and suppliers can lead to new opportunities þ Cell phone design from Europe þ Cell phone fads from Japan þ Extend the product life cycle © 2008 Prentice Hall, Inc. 2 – 21

Learn to Improve Operations þ Remain open to the free flow of ideas þ General Motors partnered with a Japanese auto manufacturer to learn þ Equipment and layout have been improved using Scandinavian ergonomic competence © 2008 Prentice Hall, Inc. 2 – 22

Attract and Retain Global Talent þ Offer better employment opportunities þ Better growth opportunities and insulation against unemployment þ Relocate unneeded personnel to more prosperous locations þ Incentives for people who like to travel © 2008 Prentice Hall, Inc. 2 – 23

Cultural and Ethical Issues þ Cultures can be quite different þ Attitudes can be quite different towards þ Punctuality þ Lunch breaks þ Environment þ Intellectual property © 2008 Prentice Hall, Inc. þ Thievery þ Bribery þ Child labor 2 – 24

You May Wish To Consider þ National literacy rate þ Rate of innovation þ Rate of technology change þ Number of skilled workers þ Political stability þ Product liability laws þ Export restrictions þ Variations in language © 2008 Prentice Hall, Inc. þ Work ethic þ Tax rates þ Inflation þ Availability of raw materials þ Interest rates þ Population þ Number of miles of highway þ Phone system 2 – 25

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

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

Fed. Ex 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

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 company’s 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

Strategy þ Action plan to achieve mission þ Functional areas have strategies þ Strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses © 2008 Prentice Hall, Inc. 2 – 42

Competing on Differentiation Uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer’s perception of value þ Safeskin gloves – leading edge products þ Walt Disney Magic Kingdom – experience differentiation þ 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. þ Southwest Airlines – secondary airports, no frills service, efficient utilization of equipment þ Wal-Mart – small overheads, shrinkage, distribution costs þ Franz Colruyt – no bags, low light, no music, doors on freezers © 2008 Prentice Hall, Inc. 2 – 45

Competing on Response þ Flexibility is matching market changes in design innovation and volumes þ Institutionalization at Hewlett-Packard þ Reliability is meeting schedules þ German machine industry þ Timeliness is quickness in design, production, and delivery þ Johnson Electric, Bennigan’s, Motorola © 2008 Prentice Hall, Inc. 2 – 46

OM’s Contribution to Strategy Operations Decisions Product Quality Process Examples Specific Strategy Used Competitive Advantage FLEXIBILITY: Sony’s constant innovation of new products………………. . Design HP’s ability to lead the printer market………………Volume Southwest Airlines No-frills service……. . LOW COST Location Layout Human resource Supply chain Inventory Scheduling Maintenance © 2008 Prentice Hall, Inc. DELIVERY: Pizza Hut’s 5 -minute guarantee at lunchtime…………………. Speed Federal Express’s “absolutely, positively on time”……………. . …. Dependability QUALITY: Motorola’s HDTV converters…. ……. . . . Conformance Motorola’s pagers……………. . …. Performance Caterpillar’s after-sale service on heavy equipment……………. . AFTER-SALE SERVICE Differentiation (Better) Response (Faster) Cost leadership (Cheaper) Fidelity Security’s broad line of mutual funds…………. BROAD PRODUCT LINE Figure 2. 4 2–

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 Quality Services Goods Product is usually Product is not tangible Many objective standards Process and Customers not capacity involved design Many subjective standards 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 takes place at at production site customer’s site Table 2. 1 © 2008 Prentice Hall, Inc. 2 – 52

Process Design Variety of Products High Moderate Process-focused Mass Customization JOB SHOPS Customization at high Volume (Print shop, emergency room, machine shop, (Dell Computer’s PC, fine-dining Repetitive (modular) cafeteria) restaurant) focus ASSEMBLY LINE (Cars, appliances, TVs, fast-food Product focused restaurants) CONTINUOUS (steel, beer, paper, bread, institutional kitchen) Low © 2008 Prentice Hall, Inc. Moderate Volume High 2–

Operations Strategies for Two Drug Companies Brand Name Drugs, Inc. Competitive Advantage Generic Drug Corp. Product Differentiation Low Cost Product Heavy R&D investment; Low R&D investment; Selection and extensive labs; focus on development Design development in a broad of generic drugs range of drug categories Quality Major priority, exceed Meets regulatory requirements on a country by country basis Table 2. 2 © 2008 Prentice Hall, Inc. 2–

Operations Strategies for Two Drug Companies Brand Name Drugs, Inc. Competitive Advantage Process Location Generic Drug Corp. Product Differentiation Low Cost Product and modular process; long production runs in specialized facilities; build capacity ahead of demand Still located in the city where it was founded Process focused; general processes; “job shop” approach, shortrun production; focus on high utilization Recently moved to lowtax, low-labor-cost environment Table 2. 2 © 2008 Prentice Hall, Inc. 2–

Operations Strategies for Two Drug Companies Brand Name Drugs, Inc. Competitive Advantage Generic Drug Corp. Product Differentiation Low Cost Scheduling Centralized production planning Many short-run products complicate scheduling Layout supports automated productfocused production Layout supports process-focused “job shop” practices Table 2. 2 © 2008 Prentice Hall, Inc. 2–

Operations Strategies for Two Drug Companies Brand Name Drugs, Inc. Competitive Advantage Human Resources 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–

Operations Strategies for Two Drug Companies Brand Name Drugs, Inc. Competitive Advantage Generic Drug Corp. Product Differentiation Low Cost Inventory High finished goods inventory to ensure all demands are met Maintenance Highly trained staff; extensive parts inventory Process focus drives up work-in-process inventory; finished goods inventory tends to be low Highly trained staff to meet changing demand Table 2. 2 © 2008 Prentice Hall, Inc. 2–

Issues In Operations Strategy þ Research about effective operations management strategies þ Preconditions for developing effective OM strategies þ The dynamics of OM strategy development © 2008 Prentice Hall, Inc. 2 – 60

Characteristics of High ROI Firms þ High product quality þ High capacity utilization þ High operating efficiency þ Low investment intensity þ 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 þ þ þ þ 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 þ Engineering research development þ Location þ Scheduling © 2008 Prentice Hall, Inc. 2 – 63

Preconditions One must understand: þ Strengths and weaknesses of competitors and possible new entrants into the market þ Current and prospective environmental, technological, legal, and economic issues þ The product life cycle þ Resources available within the firm and within the OM function þ Integration of OM strategy with company’s strategy and with other functional areas © 2008 Prentice Hall, Inc. 2 – 64

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 i. Pods Xbox 360 3 1/2” Floppy disks Figure 2. 5 © 2008 Prentice Hall, Inc. 2 – 66

Product Life Cycle OM Strategy/Issues Introduction Growth Maturity Decline Product design and development critical Frequent product and process design changes Short production runs High production costs Limited models Attention to quality Forecasting critical Product and process reliability Competitive product improvements and options Increase capacity Shift toward product focus Enhance distribution 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 Figure 2. 5 © 2008 Prentice Hall, Inc. 2 – 67

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 firm’s 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 þ Identify critical success factors þ Build and staff the organization þ Integrate OM with other activities The operations manager’s 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 Product Quality Customized, or standardized 5 Define customer expectations and how to achieve them 6, S 6 Facility size, technology, capacity 7, S 7 Near supplier or near customer 8 Work cells or assembly line 9 Specialized or enriched jobs 10, S 10 Single or multiple suppliers 11, S 11 When to reorder, how much to keep on hand 12, 14, 16 Stable or fluctuating production rate 13, 15 Repair as required or preventive maintenance 17 Figure 2. 7 Process Location Layout Human resource Supply chain Inventory Schedule Maintenance © 2008 Prentice Hall, Inc. Chapter 2–

Activity Mapping Courteous, but Limited Passenger Service Lean, Productive Employees Short Haul, Point-to. Point 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–

Activity Mapping Courteous, but Limited Passenger Service Lean, Productive Employees Short Haul, Point-to. Point 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–

Activity Mapping Courteous, but Limited Passenger Service No meals (peanuts) Lean, Lower gate costs at Productive secondary airports Employees Short Haul, Point-to. Point 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–

Activity Mapping Courteous, but High number of flights Limited idle time reduces employee Passenger Service between flights Lean, Saturate a Productive lowering Employees Short Haul, Point-tocity with flights, Point Routes, Often to administrative Secondary Airports costs (advertising, HR, etc. ) Competitive Advantage: per passenger for that city Low Cost Pilot training required on only one type of aircraft High Frequent, Aircraft Reduced Utilization maintenance Standardized inventory required of Boeing Fleet because of only one type of. Aircraft 737 aircraft Reliable Schedules Figure 2. 8 © 2008 Prentice Hall, Inc. 2–

Activity Mapping Pilot training required on Courteous, but only one type of aircraft Limited Passenger Service Reduced maintenance inventory required because Haul, Point-to. Lean, Short of only one type of aircraft Routes, Often to Productive Point 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–

Activity Mapping Courteous, but Limited Passenger Reduced maintenance Service Lean, Productive Flexible union Employees inventory required because of only one type of aircraft Point-to. Short Haul, Point Routes, Often to Flexible employees and Secondary Airports standard planes aid contracts Competitive Advantage: scheduling Low Cost Maintenance personnel trained only one type of High Frequent, Aircraft Reliable aircraft Utilization Standardized 20 -minute gate Fleet of Boeing 737 Aircraft Schedules turnarounds Figure 2. 8 © 2008 Prentice Hall, Inc. 2–

Activity Mapping Automated ticketing Courteous, but machines Limited Passenger Service Empowered employees Lean, Productive Employees High Aircraft Utilization High employee Short Haul, Point-to. Point compensation Routes, Often to Secondary Airports Hire for attitude, then train Competitive Advantage: High level Low Cost of stock ownership Frequent, High number of flights Reliable reduces employee idle time Schedules Standardized Fleetbetween flights of Boeing 737 Aircraft Figure 2. 8 © 2008 Prentice Hall, Inc. 2–

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

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

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

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

Four. Multidomestic International Operations Strategies Strategy High þ Use existing þ Standardized product domestic model þ Economies of scale þ Cross-cultural learning globally Examples Texas þ Franchise, joint Instruments Caterpillar Otis Elevator ventures, subsidiaries Cost Reduction Considerations Global Strategy International Strategy Examples Heinz Examples Mc. Donald’s U. S. Steel Harley Davidson The Body Shop Hard Rock Cafe þ Import/export or license existing product Low High Local Responsiveness Considerations © 2008 Prentice Hall, Inc. (Quick Response and/or Differentiation) 2–

Four International Operations Strategies High Global Strategy Cost Reduction Considerations þ Standardized product þ Economies of scale þ Cross-cultural learning Examples Texas Instruments Caterpillar Otis Elevator International Strategy þ Import/export or license existing product Multidomestic Strategy þ Use existing domestic model globally þ Franchise, joint ventures, subsidiaries Examples U. S. Steel Harley Davidson Examples Heinz The Body Shop Mc. Donald’s Hard Rock Cafe Low High Local Responsiveness Considerations © 2008 Prentice Hall, Inc. (Quick Response and/or Differentiation) 2–

Four International Transnational Operations Strategies Strategy High þ Move material, people, ideas Examples across national Texas Instruments Caterpillar boundaries Otis Elevator þ Economies of scale þ Cross-cultural International Strategy Multidomestic Strategy þ Use existing learning þ Import/export or domestic model globally Global Strategy Cost Reduction Considerations þ Standardized product þ Economies of scale þ Cross-cultural learning license existing product Examples Coca-Cola Nestlé Examples U. S. Steel Harley Davidson Low þ Franchise, joint ventures, subsidiaries Examples Heinz The Body Shop Mc. Donald’s Hard Rock Cafe Low High Local Responsiveness Considerations © 2008 Prentice Hall, Inc. (Quick Response and/or Differentiation) 2–

Four International Operations Strategies High Transnational Strategy þ Standardized product þ Economies of scale þ Cross-cultural learning Cost Reduction Considerations Global Strategy þ Move material, people, ideas across national boundaries þ Economies of scale þ Cross-cultural learning Examples Texas Instruments Caterpillar Otis Elevator International Strategy Examples Coca-Cola Nestlé þ Import/export or license existing product Multidomestic Strategy þ Use existing domestic model globally þ Franchise, joint ventures, subsidiaries Examples U. S. Steel Harley Davidson Examples Heinz The Body Shop Mc. Donald’s Hard Rock Cafe Low High Local Responsiveness Considerations © 2008 Prentice Hall, Inc. (Quick Response and/or Differentiation) 2–

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