Lecture9
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This document discusses production strategy and acquiring physical resources for international operations. It covers capacity planning, facilities location planning, process planning, facilities layout planning, and the make or buy decision. It also discusses acquiring raw materials and fixed assets. Key production concerns discussed include quality improvement efforts, shipping and inventory costs, and decisions around reinvestment vs divestment. The document concludes by covering different options for financing business operations such as borrowing, issuing equity, and internal funding.
Lecture9
- 1. 7/27/2015 1 Managing International Operations DY Chhunsong Lecture 9 1 Fundamentals of Global Business Management 2 Production Strategy Capacity Planning: Process of accessing a company’s ability to produce enough output to satisfy market demand. Facilities Location Planning: Selecting the location for production facilities. Process Planning: Deciding the process that a company will use to create its products. Facilities Layout Planning: Deciding the spatial arrangement of production processes within production facilities.
- 2. 7/27/2015 2 Fundamentals of Global Business Management 3 Acquiring Physical Resources Make or Buy Decision: Deciding whether to make a component or to buy it from another company. Reasons to Make: Lower costs (if the same scale produced) and greater control. Reasons to Buy (Outsourcing): Lower risk (risk toward capital assets abroad), greater flexibility, market power (power towards suppliers), and bargaining power (you may decide not to buy). Fundamentals of Global Business Management 4 Acquiring Physical Resources: Raw Materials Both quantity and quality of raw materials are of importance for manufacturers even if some manufacturers may care more about quantity while some care more about quality. Companies that care more about quantity are those in mining, forestry, and fishing. Companies that care more about quality are those in food- processing business and beverage companies.
- 3. 7/27/2015 3 Fundamentals of Global Business Management 5 Acquiring Physical Resources: Fixed Assets Fixed (tangible) Assets: Company assets such as production facilities, inventory warehouses, retail outlets, and production and office equipment. Companies may acquire or modify existing fixed assets or build entirely new fixed assets. Fundamentals of Global Business Management 6 Key Production Concerns Quality-Improvement Efforts: Improving the quality of products means caring about costs (no waste) and customer value (quality). Shipping and Inventory Cost: If the cost of getting inputs into the production process is too expensive, producers tend to locate close to the source of inputs. Reinvestment vs. Divestment: Companies will reinvest if a market is experiencing rapid growth and will divest if a market is not growing or political and social issues found.
- 4. 7/27/2015 4 Fundamentals of Global Business Management 7 Financing Business Operations Borrowing (debt): Loans can be made with both local or international agencies or the capital from the parent company. Issuing Equity (stock ownership): Companies can access to pools of investors with funds that are unavailable locally by issuing stock. Internal Funding: Companies can be financed internally, whether with funds supply by the parent company or by its international subsidiaries.