Chapter 2

The Global Environment and

Operations strategy

1
Instructor: Truong Quang Duoc, Ph.D

Learning Objectives

When you complete this chapter, you

should be able to:
1. Define mission and strategy
2. Identify and explain 3 strategic approaches to
competitive advantage
3. Understand the significant key success factors
and core competencies
4. Use factor rating to evaluate both country and
provider outcources
5. Identify and explain 4 global operations strategy
options
2

1
 Boeing’s Global Supply-
Chain Strategy

Some of the International Suppliers of Boeing 787 Components

HEADQUARTERS
SUPPLIER COUNTRY COMPONENT
Latecoere France Passenger doors
Labinel France Wiring
Dassault France Design and PLM software
Messier-Bugatti France Electric brakes
Thales France Electrical power conversion
system and integrated
standby flight display
Messier-Dowty France Landing gear structure
Diehl Germany Interior lighting

Boeing’s Global Supply-

Chain Strategy

Some of the International Suppliers of Boeing 787 Components

HEADQUARTERS
SUPPLIER COUNTRY COMPONENT
Cobham UK Fuel pumps and valves
Rolls-Royce UK Engines
Smiths Aerospace UK Central computer systems
BAE Systems UK Electronics
Alenia Aeronautica Italy Upper center fuselage and
horizontal stabilizers
Toray Industries Japan Carbon fiber for wing and tail
units
Fuji Heavy Industries Japan Center wing box

2
 Boeing’s Global Supply-
Chain Strategy

Some of the International Suppliers of Boeing 787 Components

HEADQUARTERS
SUPPLIER COUNTRY COMPONENT
Kawasaki Heavy Japan Forward fuselage, fixed
Industries sections of wing, landing
gear wheel well
Teijin Seiki Japan Hydraulic actuators
Mitsubishi Heavy Japan Wing box
Industries
Chengdu Aircraft Group China Rudder
Hafei Aviation China Parts
Korean Airlines South Korea Wingtips
Saab Sweden Cargo and access doors

Global Strategies
 Boeing – sales and supply chain are worldwide
 Italy’s 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
 Volvo – considered a Swedish company (controlled by Ford
US company), recently purchased by Cheely (Chinese
company).
 Haier – A Chinese company, produces compact refrigerators
(it has 1/3 of the US market) and wine cabinets (it has 1/2 of
the US market) in South Carolina

3
 Growth of World Trade

60 –

55 –

50 –

45 –

40 –
Percent

35 –

30 –

25 –

20 –

15 –

10 |– | | | | | | | |
Figure 2.1
1970 1975 1980 1985 1990 1995 2000 2005 2010 7
Year

Some Multinational Corporations

% Sales % Assets
Outside Outside
Home Home Home % Foreign
Company Country Country Country Workforce

Citicorp USA 34 46 NA
Colgate- USA 72 63 NA
Palmolive
Dow USA 60 50 NA
Chemical
Gillette USA 62 53 NA
Honda Japan 63 36 NA
IBM USA 57 47 51
8

4
 Some Multinational Corporations
% Sales % Assets
Outside Outside
Home Home Home % Foreign
Company Country Country Country Workforce

ICI Britain 78 50 NA
Nestle’ Switzerland 98 95 97
Philips Netherlands 94 85 82
Electronics
Siemens Germany 51 NA 38
Unilever Britain & 95 70 64
Netherlands
9

Reasons to Globalize

6 Reasons to Globalize
Tangible 1. Improve supply chain
Reasons
2. Reduce costs (labor, taxes, tariffs, etc.)
3. Improve operations
4. Understand markets
5. Improve products
Intangible
Reasons 6. Attract and retain global talent

10

10

5
 Improve the Supply Chain
 Locating facilities closer to unique resources
(expertise, labor, raw material etc.)
 Examples:
 Auto design to California
 Athletic shoe production to China
 Perfume manufacturing in France

11

11

Reduce Costs
 Foreign locations with lower wage rates can lower
both direct and indirect costs
 Trade agreement can lower tariffs
• Maquiladoras (Free trade zones- US-Mexico)
• Trade Agreement
• WTO- World Trade Organization
• NAFTA- North American Free Trade Agreement
(USA-Canada-Mexico)
• APEC, SEATO (Australia, New Zealand, Japan, Hong
Kong, South Korea, New Guinea, and Chile),
MERCOSUR (Argentina, Brazil, Paraguay, Uruguay)
• European Union (EU)
• EVFTA 12

12

6
 Improve Operations

 Understand differences between how

business is handled in other countries
• Japanese – inventory management
• Scandinavians – ergonomics
 International operations can improve
response time and customer service

13

13

Understand markets
 Interacting with foreign customers,
suppliers, competition can lead to new
opportunities for new products
• Cell phone design move from Europe to
Japan
• Extend the product
life cycle

14

14

7
 Improve Products

 Remain open to free flow of ideas

 Toyota and BMW manage joint research
and development
• Reduced risk, state-of-the-art design,
lower costs
 Samsung and Bosch jointly produce
lithium-ion batteries

15

15

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
in foreign countries

16

16

8
 Cultural and Ethical Issues

 Social and cultures can be quite different

 Attitudes can be quite different towards

 Punctuality  Thievery
 Lunch breaks  Bribery
 Environment  Child labor
 Intellectual
property

17

17

Companies Want To Consider

 National literacy rate  Work ethic
 Rate of innovation  Tax rates
 Rate of technology  Inflation
change
 Availability of raw materials
 Number of skilled
 Interest rates
workers
 Population
 Political Stability
 Number of miles of
 Product liability laws
highway
 Export restrictions
 Phone system
 Variations in language 18

18

9
 Developing Missions & Strategies

Mission statements tell an

organization where it is going

The Strategy tells the

organization how to get there

19

19

Mission
 Mission - where are you going?

• Organization’s purpose
for being
• Answers ‘What do we
contribute to society?’
• Provides boundaries and
focus

20

10
 Mission:
 To refresh the world.
 To inspire moments of
optimism and happiness.
 To create value and
make a difference.

21

21

TOYOTA
moving forward

"To attract and attain customers with high-

valued products and services and the
most satisfying ownership experience in
America.“
"To be the most successful and respected
car company in America."

22

22

11
 Our Mission:
Delight our customers, employees, and
shareholders by relentlessly delivering
the platform and technology
advancements that become essential to
the way we work and live.
Our goal is to be the preeminent provider of
semiconductor chips and platforms for
the worldwide digital economy
23

23

Mission:
Global market leader of the international
express and logistics industry, specializing
in providing innovative and customized
solutions from a single source.

24

24

12
 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.

25

25

This mission statement for

Walmart is:

"help people save

money so they can
live better"
26

26

13
 Factors Affecting Mission

Philosophy
and Values

Profitability
Environment
and Growth
Mission

Customers Public Image

Benefit to
Society
27

27

The Need for an Explicit Mission

 Why is this firm in business?

 What are our economic goals?
 What is our operating philosophy in terms of
quality, company image, and self-concept?
 What are our core competencies and
competitive advantages?
 What customers do and can we serve?
 How do we view our responsibilities to
stockholders, employees, communities,
environment, social issues, and competitors?
28

28

14
 Formulating a Mission
 The typical business begins with the beliefs,
desires, and aspirations of a single
entrepreneur
 These beliefs are usually the basis for the
company’s mission
 As the business grows or is forced to alter
its product, market, or technology,
redefining the company mission may be
necessary
29

29

Mission Statement Components

1. Customer-market
2. Product-service
3. Geographic Domain
4. Technology
5. Concern for Survival
6. Philosophy
7. Self-concept
8. Concern for Public
Image
30

30

15
 Strategic Process

Organization’s
Mission

Functional
Area Missions

Finance/
Marketing Operations
Accounting
31

31

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.

32

32

16
 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.
33

33

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.
34

34

17
 Sample Missions
Sample OM Department Missions
Supply chain To collaborate with suppliers to develop
management 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.
35

35

Strategy

 Action plan to achieve mission

 Functional areas have
strategies
 Strategies exploit
opportunities and strengths,
neutralize threats, and avoid
weaknesses

36

36

18
 Alternative Strategic Management Structures

37

37

Strategies for Competitive

Advantage

 Differentiation – better, or
at least different
 Cost leadership – cheaper
 Response – more response

38

38

19
 Competing on Differentiation
Uniqueness can go beyond both the physical
characteristics and service attributes to encompass
everything that impacts customer’s perception of
value
 Safeskin gloves-
leading edge products
 Walt Disney Magic
Kingdom – experience
differentiation
 Hard Rock Cafe –
dining experience
39

39

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,
and doors on freezers

40

40

20
 Competing on Response

 Flexibility is matching market

changes in design innovation and
volumes
 A way of life at Hewlett-Packard
 Reliability is meeting schedules
 German machine industry
 Timeliness is quickness in
design, production, and delivery
 Johnson Electric, Motorola,
Pizza Hut

41

41

OM’s Contribution to Strategy

10 Operations Competitive
Decisions Approach Example Advantage

Product DIFFERENTIATION
Innovative design Safeskin’s innovative gloves
Broad product line Fidelity Security’s mutual funds
Quality After-sales service Caterpillar’s heavy equipment
service
Process Experience Hard Rock Café’s dining
experience

Location COST LEADERSHIP

Low overhead Franz-Colruyt’s warehouse-type
Differentiation
stores
Layout Effective capacity (better)
use Southwest Airline’s
Human aircraft utilization
resource Inventory
Response
management Wal Mart’s sophisticated
distribution system (faster)
Supply chain Cost
RESPONSE leadership
Flexibility Hewlett-Packard’s response to (cheaper)
Inventory
volatile world market
Reliability FedEx’s “absolutely, positively,
Scheduling on time”
Quickness Pizza Hut’s 5-minute guarantee
at lunchtime
Maintenance
42

42

21
 Managing Global Service Operations

Requires a different perspective on:

 Capacity planning
 Location planning
 Facilities design and layout
 Scheduling

43

43

Strategy development via

Process design
Process-focused
High Mass Customization
JOB SHOPS
Customization at
(Print shop, emergency high Volume
room, machine shop,
fine dining rest. (Dell Computer’s PC,
Variety of Products

Repetitive cafeteria)
(modular) focus
ASSEMBLY LINE
Moderate (Cars, appliances,
TVs, fast-food
restaurants) Product focused
CONTINUOUS
(steel, beer,
paper, bread,
institutional
kitchen)
Low

Low Moderate High

Volume 44

Mission: To provide outstanding French fine dining

44

22
 Issues In Operations Strategy

 Resources view
 Value-chain analysis
 Porter’s Five Forces model
 Operating in a system with many
external factors
 Constant change

45

45

Issues in Operations Strategy

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
46
46

46

23
 Issues in Operations Strategy
Elements of 28% Operations Management
 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
47

47

Product Life Cycle

Introduction Growth Maturity Decline
Best period to Practical to Poor time to Cost control
increase market change price or change image, critical
Company Strategy/Issues

share quality image price, or quality

R&D engineering Strengthen niche Competitive costs

is critical become critical
Defend market
position Drive-through
Internet search engines restaurants
LCD & DVDs
Xbox 360 plasma TVs
iPods
Boeing 787
Sales 3D printers

3-D game Electric Analog

players vehicles TVs
Twitter

48
Strategy and issues during a product’s life

48

24
 Product Life Cycle
Introduction Growth Maturity Decline
Product design Forecasting critical Standardization Little product
and development Fewer product differentiation
Product and
critical process reliability changes, more Cost
OM Strategy/Issues

Frequent product minor changes minimization

Competitive
and process product Optimum capacity Overcapacity in
design changes improvements and Increasing the industry
Short production options stability of Prune line to
runs Increase capacity process eliminate items
High production Long production not returning
Shift toward good margin
costs product focus runs
Limited models Product Reduce
Enhance capacity
Attention to quality distribution improvement and
cost cutting

49

49

SWOT Analysis

Mission

Internal External
Strengths Opportunities
Analysis

Internal External
Weaknesses Threats
Strategy

50

50

25
 Strategy Development Process

Analyze the Environment

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, after-
sale service, broad product lines. 51

51

Strategy Development and

Implementation

 Identify key success factors (KFSs)

 Integrate OM with other activities
 Build and staff the organization

The operations manager’s job is to implement an

OM strategy, provide competitive advantage, and
increase productivity

52

52

26
 Key Success Factors
Support a Core Competence and Implement Strategy by
Identifying and Executing the Key Success Factors in the Functional Areas

Marketing Finance/Accounting Production/Operations

Service Leverage
Distribution Cost of capital
Promotion Working capital
Channels of Receivables
distribution Payables
Product positioning Financial control
(image, functions) Lines of credit

Decisions Sample Options Lecture

Product Customized, or standardized 3
Quality Define customer expectations and how to achieve them 4
Process Facility size, technology, capacity 5
Location Near supplier or near customer 8
Layout Work cells or assembly line 9
Human resource Specialized or enriched jobs 14
Supply chain Single or multiple suppliers 10
Inventory When to reorder, how much to keep on hand 11
Schedule Stable or fluctuating production rate 12
Maintenance Repair as required or preventive maintenance No 53

53

Activity Mapping at
Southwest Airlines
Courteous, but
Limited Passenger
Service

Lean, Short Haul, Point-to-

Productive Point Routes, Often to
Employees Secondary Airports

Competitive Advantage:
Low Cost

High Frequent,
Aircraft Reliable
Utilization Standardized Schedules
Fleet of Boeing
737 Aircraft
54

54

27
 Activity Mapping at
Southwest Airlines
Courteous, but
Limited Passenger
Service

Lean, Short Haul, Point-to-

Productive Point Routes, Often to
Employees Automated ticketing machines Secondary Airports
No seat assignments
Competitive Advantage:
No baggage transfers
Low Cost
No meals (peanuts)
High Frequent,
Aircraft Reliable
Utilization Standardized Schedules
Fleet of Boeing
737 Aircraft
55

55

Activity Mapping at
Southwest Airlines
Courteous, but
Limited Passenger
Service
No meals (peanuts)
Lean,
Lower gate costs at secondary Short Haul, Point-to-
Productive airports Point Routes, Often to
Employees Secondary Airports
High number of flights reduces
employee idle time between flights
Competitive Advantage:
Low Cost

High Frequent,
Aircraft Reliable
Utilization Standardized Schedules
Fleet of Boeing
737 Aircraft
56

56

28
 Activity Mapping at
Southwest Airlines
Courteous, but
Limited Passenger
Service

Lean, Short Haul, Point-to-

Productive Point Routes, Often to
Employees Secondary Airports
High number of flights reduces
Competitive
employee Advantage:
idle time between flights
Low Cost
Saturate a city with flights, lowering
administrative costs (advertising, HR,
High etc.) per passenger for that city Frequent,
Aircraft Reliable
Pilot training required on only one
Utilization Schedules
Standardized
type of aircraft
Fleet of Boeing
Reduced maintenance 737 Aircraft
inventory
required because of only one type of 57
aircraft

57

Activity Mapping at
Southwest Airlines
Courteous, but
Limited Passenger
Service
Pilot training required on only one
type of aircraft
Lean, Short Haul, Point-to-
Reduced maintenance inventory
Productive Point Routes, Often to
Employees required because of only one type of
Secondary Airports
aircraft
Competitive Advantage:
Excellent supplier relations with
Low
Boeing has Cost
aided financing

High Frequent,
Aircraft Reliable
Utilization Standardized Schedules
Fleet of Boeing
737 Aircraft
58

58

29
 Activity Mapping at
Southwest Airlines
Courteous, but
Limited
ReducedPassenger
maintenance inventory
Service
required because of only one type of
aircraft
Lean,
Flexible union Short Haul, Point-to-
Productive Flexible employees and Point
standard
Routes, Often to
contracts
Employees planes aid scheduling
Secondary Airports
Maintenance personnel trained only
Competitiveone
Advantage:
type of aircraft
Low Cost
20-minute gate turnarounds
High Frequent,
Aircraft Reliable
Utilization Standardized Schedules
Fleet of Boeing
737 Aircraft
59

59

Activity Mapping at
Southwest Airlines
Automated ticketing
Courteous, but machines
LimitedEmpowered
Passenger employees
Service
High employee compensation
Lean, Short Haul, Point-to-
Productive Hire for attitude, then train
Point Routes, Often to
Employees Secondary Airports
High level of stock ownership

Competitive Advantage:
High number of flights reduces
employee
Low Cost between flights
idle time

High Frequent,
Aircraft Reliable
Utilization Standardized Schedules
Fleet of Boeing
737 Aircraft
60

60

30
 Implementing Strategic
Decisions
TABLE 2.1 Operations Strategies of Two Drug Companies
BRAND NAME DRUGS, INC. GENERIC DRUGS CORP.

COMPETITIVE PRODUCT DIFFERENTIATION LOW COST STRATEGY

ADVANTAGE STRATEGY
Product Heavy R&D investment; extensive Low R&D investment; focus on
selection and labs; focus on development in a broad development of generic drugs
design range of drug categories

Quality Quality is major priority, standards Meets regulatory requirements on a

exceed regulatory requirements country-by-country basis, as
necessary

Process Product and modular production Process focused; general production

process; tries to have long product processes; “job shop” approach, short-
runs in specialized facilities; builds run production; focus on high
capacity ahead of demand utilization

Location Still located in city where it was Recently moved to low-tax, low-labor-
founded cost environment
61

61

Implementing Strategic
Decisions
TABLE 2.1 Operations Strategies of Two Drug Companies
BRAND NAME DRUGS, INC. GENERIC DRUGS CORP.
COMPETITIVE PRODUCT DIFFERENTIATION LOW COST STRATEGY
ADVANTAGE STRATEGY
Layout Layout supports automated product- Layout supports process-focused “job
focused production shop” practices
Human Hire the best; nationwide searches Very experienced top executives
resources provide direction; other personnel paid
below industry average
Supply chain Long-term supplier relationships Tends to purchase competitively to find
bargains
Inventory Maintains high finished goods Process focus drives up work-in-
inventory primarily to ensure all process inventory; finished goods
demands are met inventory tends to be low
Scheduling Centralized production planning Many short-run products complicate
scheduling
Maintenance Highly trained staff; extensive parts Highly trained staff to meet changing
inventory demands 62

62

31
 Strategic Planning, Core
Competencies, and Outsourcing

 Outsourcing – transferring activities that

traditionally been internal to external
suppliers
 Accelerating due to
 Increased technological expertise
 More reliable and cheaper transportation
 Rapid development and deployment of
advancements in telecommunications and
computers
63

63

Strategic Planning, Core

Competencies, and Outsourcing

 Subcontracting - contract manufacturing

 Outsourced activities

 Legal
services
 Travel  Production
services  Surgery
 Payroll

64

64

32
 Theory of Comparative
Advantage

 If an external provider can perform

activities more productively than the
purchasing firm, then the external
provider should do the work
 Purchasing firm focuses on core
competencies
 Drives outsourcing

65

65

Risks of Outsourcing

TABLE 2.2 Potential Advantages and Disadvantages of Outsourcing

ADVANTAGES
Cost savings
Gaining outside expertise
Improving operations and service
Maintaining a focus on core
competencies
Accessing outside technology
DISADVANTAGES
Increased logistics and inventory
costs
Loss of control (quality, delivery, etc.)
Potential creation of future
competition
Negative impact on employees
Risks may not manifest themselves
for years
66

66

33
 Rating Outsourcing Providers

 Insufficient analysis most common reason

for failure
 Factor rating method
 Points and weights assigned for each
factor to each

67

67

Rating Provider Selection Criteria

TABLE 2.3 Factor Ratings Applied to National Architects’s Potential IT Outsourcing Providers
OUTSOURCING PROVIDERS
IMPORTANCE BIM S.P.C. TELCO
FACTOR (CRITERION) WEIGHTS (U.S.) (INDIA) (ISRAEL)
1. Can reduce operating costs .2 3 3 5
2. Can reduce capital investment .2 4 3 3
3. Skilled personnel .2 5 4 3
4. Can improve quality .1 4 5 2
5. Can gain access to technology not in
company .1 5 3 5
6. Can create additional capacity .1 4 2 4
7. Aligns with policy/philosophy/culture .1 2 3 5
Totals 1.0 3.9 3.3 3.8

Score for BIM = (.2 * 3) + (.2 * 4) + (.2 * 5) + (.1 * 4) + (.1 * 5) + (.1 * 4) + (.1 * 2) = 3.9
68

68

34
 Global Operations Strategy
Options
 International business
 A firm that engages in cross-border
transactions.
 Multinational Corporation (MNC)
 A firm that has extensive involvement in
international business, owning or controlling
facilities in more than one country
 MNC applies to world’s large and well-known
businesses (IBM)

69

69

4 Global Strategies
 International Strategy: uses exports and licenses to
penetrate the global area (Harley Davidson, US Steel)
 Global Strategy: Operating decisions are centralized and
headquarters coordinates the standardization and learning
between facilities (Texas Instruments, Caterpillar)
 Multi-domestic Strategy: Operating decisions are
decentralized to each country to enhance local
responsiveness (McDonald’s)
 Transnational Strategy: Exploits economies of scale
and learning, as well as pressure for responsiveness, by
recognizing that core competencies reside everywhere in
the organization (Coca-Cola, Nestle’)
70

70

35
 Four International Operations
Strategies
High International
Strategy
 Import/export or license
existing product
Cost Reduction

Examples: Global markets are

U.S. Steel
Harley Davidson penetrated using
exports and
licenses

Low
Low High
Local Responsiveness 71

(Quick Response and/or Differentiation)

71

Four International Operations

Strategies
High
Cost Reduction

International Strategy
 Import/export or
license existing
product

Examples:
U.S. Steel
Harley Davidson

Low
Low High
Local Responsiveness 72

(Quick Response and/or Differentiation)

72

36
 Four International Operations Strategies
Global
Strategy
High
 Standardized
product
 Economies of scale
 Cross-cultural
Cost Reduction

learning
Operating decisions are
Examples:
International Strategy
centralized & headquarters
Texas Instruments
 Import/export or
license existing
Caterpillar
product
coordinates the
Otis
ExamplesElevator standardization and
U.S. Steel
Harley Davidson learning between facilities
Low
Low High
Local Responsiveness 73

(Quick Response and/or Differentiation)

73

Four International Operations

Strategies
High
Global Strategy
 Standardized product
 Economies of scale
 Cross-cultural learning

Examples
Texas Instruments
Cost Reduction

Caterpillar
Otis Elevator

International Strategy
 Import/export or
license existing
product

Examples
U.S. Steel
Harley Davidson

Low
Low High
Local Responsiveness 74

(Quick Response and/or Differentiation)

74

37
 Four International Operations Strategies
Multidomestic
High
Strategy
 Use existing
Global Strategy
domestic
 Standardized productmodel
 Economies of scale
globally
 Cross-cultural learning

 Examples
Franchise,
Texas Instruments
joint
Cost Reduction

ventures,
Caterpillar
Otis Elevator
subsidiaries

Examples:
International Strategy
Operating decisions are
Heinz
Import/export or decentralized to each
license existing
McDonald’s
product country to enhance local
The
Examples Body Shop
U.S. Steel responsiveness
Hard Rock Cafe
Harley Davidson

Low
Low High
Local Responsiveness 75

(Quick Response and/or Differentiation)

75

Four International Operations

Strategies
High
Global Strategy
 Standardized product
 Economies of scale
 Cross-cultural learning

Examples
Texas Instruments
Cost Reduction

Caterpillar
Otis Elevator

International Strategy Multidomestic Strategy

 Use existing
 Import/export or domestic model globally
license existing  Franchise, joint ventures,
product subsidiaries
Examples Examples
U.S. Steel Heinz The Body Shop
Harley Davidson McDonald’s Hard Rock Cafe

Low
Low High
Local Responsiveness 76

(Quick Response and/or Differentiation)

76

38
 Four International Operations Strategies
Transnational
High
Strategy
 Global
Move Strategy
material,
 Standardized product
people, ideas
 Economies of scale
 Cross-cultural learning
Combines the benefits
across national
Examples
of global-scale
boundaries
Texas Instruments efficiencies with the
Cost Reduction

Caterpillar
 Economies of
Otis Elevator benefits of local
scale responsiveness
International
Cross-cultural
Strategy Multidomestic Strategy
 Use existing
learning
 Import/export or
license existing
domestic model globally
 Franchise, joint ventures,
product subsidiaries

Examples:
Examples
U.S. Steel
Examples
Heinz The Body Shop
Harley Davidson
Coca-Cola McDonald’s Hard Rock Cafe

Low Nestlé
Low High
Local Responsiveness 77

(Quick Response and/or Differentiation)

77

Four International Operations

Strategies
High
Global Strategy Transnational Strategy
 Standardized product  Move material, people, ideas
 Economies of scale across national boundaries
 Cross-cultural learning  Economies of scale
 Cross-cultural learning
Examples
Texas Instruments Examples
Cost Reduction

Caterpillar/Komatsu Coca-Cola
Otis Elevator Nestlé

International Strategy Multidomestic Strategy

 Use existing
 Import/export or domestic model globally
license existing  Franchise, joint ventures,
product subsidiaries
Examples Examples
U.S. Steel Heinz The Body Shop
Harley Davidson McDonald’s Hard Rock Cafe

Low
Low High
Local Responsiveness 78

(Quick Response and/or Differentiation)

78

39
 Ranking Corruption
Rank Country 2019 CPI Score (out of 100)
1 Demark, Finland, New Zealand 90 Least
4 Sweden 88 Corrupt
5 Singapore 87
6 Switzerland 86
7 Australia, Norway 85
9 Canada, Netherlands 84
13 Germany 79
14 Hong Kong 77
17 Japan, UK 74
19 USA 73
37 Taiwan 61
39 Israel 60
45 South Korea 56 Most
80 China 39 Corrupt
117 Vietnam 31
133 Russia 28
2 - 79

79

Discussion in class

 What is the operations strategy of

SAMSUNG, HONDA, MADDAZ, HSBC, KFC?
 Who is responsible for strategic planning
 Competing on cost means having the lowest
cost? Give example
 List of key success factors of Vinamilk
 Construct SWOT analysis of HUM restaurant

2 - 80

80

40