Presentation

on
International Business

Unit No.IV
 UNIT IV PRODUCTION, MARKETING, FINANCIAL
AND HUMAN RESOURCE MANAGEMENT OF
GLOBAL BUSINESS

Global production –Location –scale of operations- cost of

production – Make or Buy decisions – global supply chain
issues – Quality considerations- Globalization of markets,
marketing strategy – Challenges in product development ,
pricing, production and channel management- Investment
decisions – economic- Political risk – sources of fund-
exchange –rate risk and management – strategic orientation
– selection of expatriate managers- Training and
development – compensation.
Introduction

• GLOBAL PRODUCTION

• ACCESS LOWER-COST WORKERS

• ACCESS TECHNICAL EXPERTISE

OBJECTIVES OF GLOBAL PRODUCTION

• Cost reductions can be realized through improved efficiency and

through eliminating defective products from both the supply chain
and the manufacturing process.
•  Implementing Just-In-Time (JIT) manufacturing is an important
step in achieving these objectives.
•  Quality improvement can be realized through a number of
initiatives, including total quality management (TQM) and ISO 9000
certification.
•  The objectives of reducing costs and increasing quality are not
independent of each other.
• REASONS FOR GLOBAL OPERATIONS
• Global spread of Production

– to serve their worldwide customers better

– preempt competitors
– work with sophisticated suppliers
– collect critical marketing, technological, and
competitive intelligence
• Advantages of Global Production

– Cheap labour cost

– Cheap raw material cost
– Technology
Global Production Network Strategies

• Multi-domestic:

• Globally integrated:
STRATEGY, PRODUCTION, AND
LOGISTICS
• To lower costs, firms can:
• To improve quality, firms can
• To increase product quality, most firms:
KEY FACTORS INVOLVED IN GLOBAL
PRODUCTION LOCATION DECISIONS
• Country factors
• Technology factors
• Product factors
BASIC STRATEGIES FOR ADOPTING
LOCATION FACILITIES
• Concentration of manufacturing
• Decentralization of manufacturing
• Managing Global Supply Chain Issues
• Internal factors disrupt global supply chain
• Extraneous factors disrupt global supply chain
 SIX STRATEGIC ROLE OF FOREIGN
FACTORIES
• Offshore Factory
• produce specific terms at a low cost – items that are then exported either
for further work or for sale.
• Source Factory
• production planning, process changes, outbound logistics, and product
customization and redesign decisions (low cost)
• Server Factory
• overcome tariff barriers and to reduce taxes, logistics costs or exposure
to foreign exchange fluctuations
• Contributor Factory -
• Serves a specific national or regional market
• Outpost Factory - Primary role is to collect information
• Lead Factory: Creates new processes, products and technologies for
the entire company.
COST OF PRODUCTION
• Fixed Costs
• Variable Costs
• OUTSOURCING PRODUCTION - MAKE – OR – BUY DECISIONS
• Factors that are involved in make or buy decisions:
•  Cost of production
•  Cost of raw materials

•  Cost of labor

•  Time spent in the research and development stage.

•  The financial capability of the organization (both own organization and outsourced
organization)

•  The in house expertise

•  The volume requirements

•  The critical nature of the item

•  The desired standard of output and quality

•  Need for and updated technology and up gradation of the product

•  The special requirements for the item

GLOBALIZATION OF MARKETS

• GLOBAL MARKETING STRATEGY

– Difference between global marketing

strategy and domestic marketing strategy
– Developing global marketing strategies
• Buyer behavior characteristics
• Socio economic condition
• Marketing infrastructure
• Differences in competitive environment
• Standardized strategy
• CHALLENGES IN GLOBAL NEW PRODUCT DEVELOPMENT
• Challenges in Global pricing

– Three major objectives known in pricing are

market skimming, price penetration and
market holding.
– Cost-plus pricing
– Transfer pricing (Cost based, market based
and negotiated price)
• Market based (Ethnocentric, polycentric and geocentric)
INTERNATIONAL CHANNEL
DISTRIBUTION AND MANAGEMENT
• Types of channel members

– Resellers
• Retailers
• Wholesalers
• Industrial distributors

• Specialty service firms

• Agents and brokers
• Distribution service firms
 BENEFITS OFFERED BY CHANNEL
MEMBERS
• Cost saving in specialization
• Reduce exchange time
• Customers want to conveniently shop for variety
• Resellers sell smaller quantities
• Create sales
• Offer financial support
• Channel evaluation
• Cost of distribution
• Coverage of the market
• Customer service
• Communication and control
• Channel modification
 ESTABLISHING CHANNEL
RELATIONSHIPS
• Delivery
• Profit margin
• Other incentives
• Packaging
• Training
• Promotional help
INTERNATIONAL INVESTMENT
DECISIONS
• Political risk on foreign investment decisions

• Types of political risk

• Macro
• Micro
SOURCES OF FUNDS
• The capital market
• Loan stock
• Retained earnings
• Bank barrowings
• Government sources
• Business expansion scheme funds
• Venture capital
• Franchising
Role of Expatriates in Global environment

• employees sent out on foreign assignments -- for long or short

international assignments.

The three types of expatriates –

 Third Country Nationals (TCNs),
 Parent Country Nationals (PCNs) and
 Host Country Nationals (HCNs)
EXPATRIATE COMPENSATION

• Home-Based Approach
• Host-Based Approach
• Global Market Approach
 ELEMENTS OF EXPATRIATE
COMPENSATION PACKAGE
• Expat premium
• Mobility premium
• Cost of living allowance
• Installation premium
• Children’s scholarship
• Health coverage and insurance
• Moving and storage benefit
• Tax and social security protection
• Direct Compensation
REPATRIATION

• Repatriation is the process of returning a person to their place of

origin or citizenship. This includes the process of returning refugees
or soldiers to their place of origin following a war.
• Reasons of Repatriation