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Global Operations Management -à
Marketing Management à
Global Operations Management
Introduction Global Operations Management.
Ch 1 Introduction, History, Globalization
Ch 2 Operations in Global Business Strategy
Ch 3 Improving Operations Performance
Ch 4 ...Improving Global Supply Chain .....................Performance
Ch 5 ...Pushing The Limits of Global ..............Operational Performance.
Notes below, with Case Concerns.
People Experience globalization differently depending on their occupation, home
country, company, industry and understanding.
For a NIC newly industrialized country or Developing country it can mean economic freedom or depletion of their natural resources.
Worldwide collaboration on CAR design.
GOM it must happen to learn from customers and to line up their work between parts of the organization.
GOM must make more and better products a lower cost. Serving customer’s world wide with common production processes and component design.
Elimination of many middle management jobs and Industrial engineers also are cut back.
Now the key players are experts arranged in teams. It used to be money and physical labor.
Effects of GO are bringing in money from outside sources, selling outside of it, sell more, and to invent product.
Computer and microprocessors are a key reason here along with lowering of trade barriers.
New approaches, new technologies.
Must use mind and hands.
Successful with senior mgmt support. OM mgmt must also learn new mindset and methods. ~japan took over.
Trade supplemented by investment for compliment of the trade.
Managerial influenced the local biz more as time went on.
Traders usually sought these for cheaper cost or for being available. Also to support THEIR trade.
Invested locally to support colonies.
Returns on investments were higher but riskier. Huh…
In 1914 direct foreign investment to world GDP reached a level it has not matched since.
DFI managers have direct influence from corp.office.
Portfolio investments do not.
Reason for trade was is getting resources,Tariffs made local mfg a needed evil…
European saved material while Americans saved labor.
After WWII USA *4 its DFI.
In 1973 over ½ of the worlds biggest companies were USA. 2/3 of worlds DFI and exports.
NIC rapid growth. JAPAN growth less than 1/3 of USA. By 1992 it was 10% more… where was our leaders ??
World DFI and trade increased by factor of 4 1978-1990.
Most of DFI still to developing countries. Others investing in USA.
1963 4 TIGERS of Republic of Korea,Hong Kong,Singapore,Taiwan. From 1% to 7% from 1963-1990.
Growth will be from DC.=developing countries.
Exchange rates are determined more by private operation than government.
DFI into China increase.
Volume of currency increased exponentially after 1986 and controls ant tariffs loosened by governments.
European front also did this and worked in harmony with local countries.
NAFTA for us.
GATT agreement on trade and tariffs lowered barriers 38 percent.
NAFTA and CHILE in 1994 and former Soviet Union is getting involved also.
Multi Nationals completing within the traid.
300 businesses do 80% of worlds foreign production. 90% have headquarted in Developed Countries.
6 firms accounted for 66 percent of the firms on the fortune 500 list.
1993 this dropped to 58 percent. Many of these were around in 1914 when DFI was king.
TRIAD=JAPAN,WESTERN EUROPE, and USA.
Game name is to not give competitor a free "net profit " ride anywhere. It will use these funds to attack you later.
Global Competition in Industrialized Markets.
Human and Technological resources available in all economies are becoming more similar.
RATIO of foreign sales to TOTAL SALES.
FOREIGN ASSETS TO TOTAL ASSETS.
They have more assets than growth, this shows growth. Mcdonalds is expanding outside USA faster than inside.
America has more than ½ of worlds MNC in 1973 NOW 30%…Voting helps?
Sometimes some companies need to be global.
GOAL is to produce new product quicker..
1980 alliances with competitors were a common way to stay on cutting edge. Firms were forced to. Or left behind.
Global competition in the NIC’s.
Government supported them. It is said that Japan would of not happen without support by govt.
These counties were hungry for info on knowledge.
The 4 TIGERS grew fast. 1966-1977 10 to 27 % imports to USA. European to USA increased 2%..
JAPAN cost now raises while the NIC come up to bat with homework done.
MORE new kids are Brazil,Poland,India,IrelandPortugal,Thailand, Spain etc…………..
OPERATION FOUNDATIONS OF GLOBALIZATION.
Managers must learn this area from basic knowledge to culture changes needed for it.
Common corporate goal across all boundaries. Global competition is fierce and nobody can wait to see…
INNOVATIONS IN INFORMATION AND COMMUNICATION TECHNOLOGIES.
INNOVATIONS IN THE MANAGEMENT OF MANUFACTURING AND TECHNOLOGY.
DIFFICULTY OF IMPLEMENTING INNOVATIONS IN OPERATIONS AND TECHNOLOGY MANAGEMENT.
TWO MAJOR TRANSITIONS IN OPERATIONS,TECHNOLOGY AND MANAGEMENT IN 20TH CENTURY.
MANAGERS CHALLENGES DURING GLOBALIZATION.
OPERATIONS IN GLOBAL BUSINESS STRATEGY.
IMPROVING OPERATIONS PERFORMANCE.
PUSHING THE LIMITS OF GLOBAL OPERATIONS PERFORMANCE
Evolution of global operation manager and their work.
Evolution of purchasing.
EVOLVING SKILLS OF GLOBAL OPERATION MANAGERS.
OBJECTIVES AND STRUCTURE OF BOOK.
STRATEGIC CHANGES REQUIRED BY GLOBALIZATION.
OPERATIONS IN MULTINATIONAL BUSINESS STRATEGY.
GLOBAL PRESSURE TO COMPETE ON SEVERAL DIMENSIONS AND TO CONTINUALLY IMPROVE.
GLOBAL OPPORTUNITIES AND PRESSURES TO OPERATE IN MORE COUNTRIES.
GLOBAL OPPORTUNITIES TO INTEGRATE INTERNATIONAL OPERATIONS.
DIFFERENCES BETWEEN MULTINATIONALS AND GLOBAL BUSINESS STRATEGIES.
OPERATIONS STRATEGIES REQUIRED BY GLOBALIZATION.
MULTINATIONAL AND GLOBAL APPROACHES TO OPERATIONS STRATEGY.
PRODUCT DEVELOPMENT AND TECHNOLOGY CHOICE.
HOW MANY MCDONALDS FORMULA.
SUMMARY OF OPERATIONS STRATEGY CHANGES REQUIRED BY GLOBALIZATION.
DIFFICULTIES IN MANAGING GLOBALIZATION.
SOURCES OF DIFFICULTIES IN GLOBALIZATION.
TRADE OFFS IN GLOBALIZATIONS.
APPROACHES TO MANAGING GLOBALIZATION.
CHANGES IN ORGANIZATION STRUCTURE.
CHANGES IN MANAGEMENT UNDERSTANDING AND BRAIN WORK NEEDED.
DEVELOPMENT OF CORE COMPETENCIES FOR GLOBAL LEARNING.
OPERATIONS IN GLOBAL BUSINESS STRATEGY.
CHAPTER 3 IMPROVING OPERATIONS PERFORMANCE.
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The role of marketing in the organization.
The business has 2 main objectives.
get the same respect.
Corporate Marketing. Advocate for customer. Analyze customer needs and requirements.
Analyze competitive offering in that market. Assess competitive effectiveness.
Carry 11 hats.
Chap 7.Product development and testing.
Why development new products?
Chap 8….Product and Brand
Chap 9…Services Marketing.
Role of Personal Selling.
Chapter 17…………..Marketing Planning and Implementation.
Lance Lawson Emerson Electric Company
Air Comfort Products
ACP is a division of the EEC. It is one of fifty divisions.
Sales of the parent company is five billion per year. Eighty three percent
of the parent companies products hold the first or second position. Company
Growth has occurred for 30 years. Emerson Electric has over 200 manufacturing
Locations worldwide in 16 countries.
In response to a strong dollar and declining exports EE gears up
for a world assault with an increasing Engineering and Development budget.
EE wants 20 percent of sales to come from new products. Their E & D
budget is increased from 2 percent of sales to 3.1 percent.
EE also wants sales growth of 15 percent and each division must pay
as they go for their expenses.
They (EE) has just went through some layoffs and had sold off 100 million
worth of their non producing units.
ACP was a consumer product division and its size overall compared to
the others was small. ACP had started in 1895.
EE philosophy was to produce the best produce at the best price. Huh?
The Ceiling Fan Market.
Seasonal and Mature.
Competition (because of imports) is fierce.
The ACP Product Line.
Two lines of models.
Sizes from 36 to 56 inches.
One Line Assembled in Taiwan. One in America.
One Line middle-notch and the other at the lower end.
A total of 17 models were produced.
The assembled one in America had the components acquired from Asia.
These "Kits" came to America to be Assembled. called "subpacks"
Assembled from many over sea vendors.
Auditor assigned for quality control with one vendor having overall
authority and responsibility of the contract.
Subpacks arrived in lots of 2000-4000 to Tennessee.
Motor and Misc. was installed in USA.
ACP bought contracts based on lowest cost.
Logistical problems were rare. But must add cost to assure this.
Facts related to present Operations.
Sub pack quality is having some problems with the overall quality.
One month transport time can create problems with the above.
Sourcing product from Taiwan limited their knowledge to Taiwan.
Currency exchange rates were beginning to work against ACP.
1. Continue with existing operation. This had no major problems and
had several benefits.
Deep Water port, Past relationship, Works with other ACP Products.
Two assemble sites, Manual Operations, Out-dated Operations~Painting.
Worker health did not cause concern with caustic chemicals used.
Had to sub-out undoable operation.
Quality did suffer but concern was minimal by existing mgmt.
EE had to buy tools and misc.
Cannot have ownership of operation.
2.Change to alternative Taiwan Vendor.
More modern operation. Single site operation. More Worker concern.
Did not require any sub-out work. ~better control.
Company was more vertically integrated. Made own tools and fixtures.
Plating and anodizing was automated and timed.
Capacity seemed to be running below what was capable of it.
Could easily be switched to ACP needs.
Not proven. No past relationship. Some analysis can not be factuated.
By accepting this fabricator, ongoing relationship with above might
Can not have ownership of operations.
3. Full Assembly in America.
Control on all aspects of assembly and fabrication.
Cost could possibly be lower. Transportation cost savings.
Existing relationship with original vendor. ~ other products.
Make shipping cost go up for other products sourced from Taiwan.
Sourcing and labor costing unknowns exist.
How would "overhead" be handled by corporate.
4. Sourcing from Mexico.
No import duties on incoming materials.
Labor rate about 75 cents an hour.
Hiring and management personnel were "supplied" by "infrastructure".
Exchange rate in our benefit is continuing. ~1987
Savings over Taiwan in Transportation costs.
Operation could be completely foreign owned, unlike Taiwan.
Closer to corporate.
Work force would require training.
Work force had high turnover and high absenteeism.
Would have to supply all tools and related equipment.
Poor developed infrastructure.
Data Not provided but Crucial.
1. What are further cost estimates of operations in America.
2. What percentage are these components overall in the products
sourced from this vendor. ~ lose shipping cost present pricing.
3. Is existing Vendor willing to update operations and facilities.
4. What is the cost of brokers, auditors, and related costs now.
5. What are their long-term desires and strategies with product.
AKA.. is it necessary to have 17 models of a product.
First Overview and Analysis.
Number of products (17) and parts (50).
Reengineer ~ reduce number of parts by reinvention.
The 5 unknowns listed above.
Only the Author knows. ~ answer them.
First Analysis of Alternatives.
· · · · · · · · · ·
My calculations reveal between 50 and 150 grand difference. 3x safety factor.
Would not risk operation when time is running out on this season to make decision.
· · · · · · · · · · Final Analysis
Linear programming model to optimize usage of resources. Regardless of supplier.
Final decision of supplier to be made at later date with more data and information present.
Dr. Al Petrosky
Case 10-3...Horizon Travel
By 1983 Horizon was involved in all stages of the package tour business. ~including airline.
Horizon expected to offer more "holidays" than ever before in 1983.
Forecasting is completed six months ahead of departure. Horizon has own travel agents even though this is a small fraction of overall sales. Horizon also owns hotels and villages.
Horizon is not the largest and must now react to new trends by the "Industry Leader".
"Industry Leader" will soon release a new brochure with new prices and others in the industry are using other methods which are of concern to Horizon.
Horizon can add travel agents, buy assets ~ hotels, reduce prices, do nothing, add a "new customer focus", etc... and / or a combination of all.
Up-Down market, Forecasting very important role.
Best year ever, even when industry was down in general....numbers good. Except for money tied up in assets.
Continue growth. React to industry leader in positive way.
Been in business 20 years before present.
Strategy of quality and consistency.
Airline new but increasing profits on ever increasing scale.
Involved in all facets of tourist industry.
Problems of planning...due to big part of forecasting and environmental variables.
Travel agent child company doing poorly on selling holidays.
Smallest of big four.
Airline division new.~ least experienced.
Assets tied up and increasing each year.
Expanding on available holidays 16 % this upcoming year.
Holidays abroad increasing ~ total.
Clientele of executives in 30's were chosen optimal by authors.
Authors attitude was positive on the company.
If courts reverse existing method of travel agents operations in UK. Will create new industry.
Leaders had collapsed before.
Thompson used a split brochure, good idea. ~ Instead of a single printing which sets "prices in stone".
Company has been growing ~ doing something right and now is the time to continue doing it.
Economies and the industries thin margins.
Fuel prices, weather, Exchange rates.
Cultural factors at other locations. ~ big one.
Probability of price war.
Competition bigger..head start in areas of operation.
Competition is better diversified. ~ larger.
Competition continuing to inovate..growing.
Inclusive tours decreasing as a whole.
Competition increasing travel agent division.
Brand Loyalty with customer low.
Independent travel agents can alienate you with small or no ill-effects.
Others discount prices, Horizon does not.
Some estimations ~ hotels, are done years in advance.
Newcomers and veterans alike are trying new techniques from direct selling to "discounting".
Issues impacting alternatives.
Court decision on ABTA and present method of operations.
Price War.....Fuel Cost....Economies...Other environmental areas~weather.
New brochure by industry leader. What will they do.
Money is tied up in assets making some an increased possibility of "cash strapping".
1. Improve existing operations with existing travel agents.
Pro Agents can add much to overall sales and return customers.
Con Agents can sell any product and customers have little brand loyalty.
2. Be happy with existing operations~except travel agents~not acceptable. ~ best year yet.
Pro No added cost.
Con Could lose more share. Market demands dynamics ?
3. More travel agents and improvement of existing.
Pro Increase sales and market share.
Con Increased money out and no one can own them all. Might obtain backlash from existing agents. Court decision plays here however.
4. Be a trend setter and figure out problem of setting operations so far ahead of actual usage.
Pro Better overall final estimates. Better use of cash flow.
Con Unproven method in market. Risky. If easy everyone would be using it. Seasonal and a "planning" type of thing.
5. Become a "discounter" to react to others. Discounts can mean several techniques.
PRO I believe this would add customers.
CON But would it add to increased profits.
6. Start a separate division which uses a different customer base and different marketing methods.
Pro Increase sales and share.
Con Money out, Risk, Copycat by others.
7. Continue to diversify with car rentals, Entertainment packages, and other methods.
Pro Increased profits.
Con More money in assets, risk. Market downturn and cash would be tied up.
Continue existing operations...Improve travel agent division...Look into expanding travel agent division.
Watch competition....Work on forecasting methods...
Watch court rulings....Watch industry environment.
Start WEB operations to attract customers. Have "virtual travel" with computer multimedia and 3D applications.
Keep abreast of technology and apply it to keep ahead and gain on the competition.
The major problem I see here is the cash flow tied up in assets. Horizon profits and new airline are doing well except for the first stated fact.
Use some linear programming or other modelings to find optimal combinations of entities to operate.
Direct mail to established customers to repeat business and notify of specials and suggestions.
Use media vehicles such as magazines, TV channel infomercials and similar means for market share.
Contingency plans UP-Down, Forecast ahead makes this area fuzzy.
1. Be ready to discount if necessary. ~ others do.
2. Be ready to adjust quickly. Become the first mover.
3. Have a "cash acquiring plan" and or be ready to increase cash holdings.
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