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Chapter Ten: Global Supply
Chain
Copyright © 2020 by The McGraw-Hill Companies, Inc. All
rights reserved.
Table 10.1
Rationale for Globalization
Objective Rationale
Increase revenue • Open up more markets
• Expand beyond competitors
• Obtain accessibility to markets that limit access without local operations
Achieve economies of scale • Take advantage of production capacity
Reduce direct cost • Take advantage of lower labor rates or real estate expense
Advance technology • Reduce energy requirements by reducing distance or changing
transportation mode
• Take advantage of differences in production requirements
• Obtain access to advanced technology that may not be available from
current locations due to historical investments
• Obtain access to specialized expertise or language skills
Copyright © 2020 by The McGraw-Hill Companies, Inc. All
rights reserved.
Table 10.1
Rationale for Globalization
Objective Rationale
Reduce firm’s global tax
liability
• Obtain local or regional tax benefits related to property, inventory, or
income
• Obtain reductions in value-added-taxes due to localized production or
other value added services (i.e., packaging inventory management,
customization)
Reduce market access
uncertainty
• Source product from location that involves less transportation uncertainty
• Source product from location that involved fewer security constraints
Enhance sustainability • Source products or other resources (including human resources) from
locations that have ongoing availability of materials and expertise such as
energy or trained workers
Copyright © 2020 by The McGraw-Hill Companies, Inc. All
rights reserved.
Table 10-2
Estimated 2012 National Logistics Expenditures
Country/Region Logistics as a Percent of Gross
Domestic Product
United States 8.5
Japan 11.0
Europe 12.9
India 12.9
Mexico 14.0
China 14.4
Asia 16.8
Copyright © 2020 by The McGraw-Hill Companies, Inc. All
rights reserved.
Generic International Strategies
High movement toward global
integration
Global strategy Transnational strategy
Low movement toward global
integration
No international strategy Multi-domestic strategy
Low movement toward local
responsiveness
High movement toward local
responsiveness
Source: James Fitzsimmons and Mona Fitzsimmons, Service Management Operations, Strategy, and
Information Technology, 7th ed. (New York: McGraw-Hill, 2011). P. 352.
Copyright © 2020 by The McGraw-Hill Companies, Inc. All
rights reserved.
Differential Characteristics of Global Services
Development
Stages
Service Focus Marketing
Strategy
Delivery
Strategy
Management
Strategy
Human
Resource
Development
No international
strategy
Standard
product for local
market
Single strategy
focused on local
market
Direct to
customer
Single simple
financials
Operated by
entrepreneur
with limited
specialization
Multi-domestic
strategy
Domestic
marketing and
delivery
Domestic
customers
Collaboration Transaction
driven with
integrated
financials
Management
with “home
country” focus
Global strategy Local market
customization
Focused
specific market
areas which
may cross
international
boundaries
Subsidiaries
with local
presence
Decentralized
operations with
local profit
responsibility
Limited top
management
with
international
experience
Transnational
strategy
Global branding
and integrated
operations
Global
customers
Worldwide flow
of key resources
Centralized
planning in
global sites
International
training and
experience
Factors and Considerations –No International
• Advantages
• Focused on local market
• Minimum coordination efforts
• Cross functional decisions made by small
group of executive managers
• Disadvantages
• Growth limited to local markets
• Not easy to respond to globally based
customers
• Not large enough to take advantage of
economies of scale
Copyright © 2020 by The McGraw-Hill Companies, Inc. All
rights reserved.
Factors and Considerations –Multi-domestic
• Advantages
• Focused on local market
• Minimum coordination efforts
• Allows firm to focus on key growth
markets while minimizing complexity
across a large number of markets.
• Disadvantages
• Not scalable
• Not easy to respond to globally based
customers
Copyright © 2020 by The McGraw-Hill Companies, Inc. All
rights reserved.
Factors and Considerations – Global
• Advantages
• Focused on local market
• Firm begins to take advantage of global
brands and products
• Can meet the unique needs of individual
markets
• Disadvantages
• Not scalable
• Not easy to respond to globally based
customers
• Limited synergies when working with
global customers
• Limited drivers for global data and
processes
Copyright © 2020 by The McGraw-Hill Companies, Inc. All
rights reserved.
Factors and Considerations – Transnational
• Advantages
• Global focus to facilitate global solution
development and delivery
• Very scalable to domestic and global
firms
• Disadvantages
• Requires substantial coordination and
information integration
• Reduced ability to respond to market
uniqueness
Copyright © 2020 by The McGraw-Hill Companies, Inc. All
rights reserved.
Table 10-6
Comparison of Global Supply Chain Characteristics
Region Infrastructure Technology Human Capital Political
North America Built up but
congested
Access to new
technology but
infrastructure
represents old
technology
High technical
talent but high
wages
Stable laws and
trade agreements
Europe Built up but
congested
Access to new
technology but
infrastructure
represents old
technology
High technical
talent but high
wages
Stable laws and
trade agreements
South America Limited and
congested
Introduction of new
technology
Low technical
talent and low
wages
Challenges due to
legal environment
and corruption
Asia Limited and
congested
Introduction of new
technology
Increasing technical
talent and wages
Challenges due to
legal environment
and corruption
Africa Minimal Introduction of new
technology
Low technical
talent and low
wages
Challenges due to
legal environment
and corruption
Copyright © 2020 by The McGraw-Hill Companies, Inc. All
rights reserved.
Mode of Entry Favorable Conditions Strengths Weaknesses
Exporting
and
Importing
• Limited or unclear sales potential in target
countries
• Standardized product requiring little product
modification
• Favorable import policies in target countries;
unclear political stability
• Minimizes involvement,
commitment, and risk
• Increases speed and flexibility of
engaging target countries
• Uses existing production
facilities worldwide
• Company and its products are viewed
as outsiders and foreign market
entrants
• Costs associated with, for example,
trade barriers, tariffs, and
transportation
Licensing
and Franchising
• Import and investment barriers exist in target
countries but moderate sales potential exist
• Large cultural distance between home and host
countries
• Licensee has limited ability to become a future
competitor
• Moderate involvement and
commitment, and low risk
• Moderate speed and flexibility of
engaging target countries
• Can circumvent import barriers;
sales potential
• Licensee period is limited in
contractual length and licensee may
become competitor
• Lack of control over the use of
company and non-company assets to
promote products
International Joint
Ventures
• Import barriers exist in target countries but
government restrictions exist on foreign
ownership
• Moderate to high sales potential of products
• Local JV partner can provide knowledge, skills,
and network
• Overcomes ownership
restrictions and cultural distance
• Potential for learning and
resource combination
• IJV ownership >50% are
typically viewed as domestic
companies
• IJVs are new companies, legally
independent from the original
companies
• IJVs are difficult to manage for the
original companies and there is a lack
of control over strategic and tactical
issues
Foreign
Direct Ownership
• Import barriers exist in target countries but low
political risk
• Small cultural distance between home and host
countries
• High sales potential of products but assets cannot
be fairly prices
• Viewed as being locally
committed and involved
• Gain knowledge, over time, of
the local market
• Can apply local skills to
customize production
• Higher risk being taken while being
more committed and involved
• Requires more human and non-
human resources, and interaction and
integration with local employees
Table 10-7
Characteristics, Strengths, and Weaknesses by Entry Mode
Source: Hult, Tomas, David Closs, David Frayer. Global Supply Chain Management: Leveraging Processes,
Measurements, and Tools for Strategic Corporate Advantage. (New York: McGraw Hill, 2014). Pg. 205.
Copyright
©
2020
by
The
McGraw-Hill
Companies,
Inc.
All
rights
reserved.
Common Forms of International Logistics Documentation
• Export irrevocable commercial letter of credit. A contract between
and importer and a bank that transfers liability or paying the exporter
from the importer to the (supposedly more creditworthy) importer’s
bank.
• Bank draft (or bill of exchange). A means of payment for an
import/export transaction. Two types exist: transaction payable on
sight with proper documents (sight draft) and transaction payable at
some fixed time after acceptance of proper documents (time draft).
Either type of draft accompanied by instructions and other
documents (but no letter of credit) is a documentary draft.
Copyright © 2020 by The McGraw-Hill Companies, Inc. All
rights reserved.
Common Forms of International Logistics Documentation
• Bill of lading. Issued by the shipping company or its agent as
evidence of a contract for shipping the merchandise and as a claim to
ownership of the goods.
• Combined Transport Document. May replace the bill of lading if
goods are shipped by air (airway bill) or by more than one mode of
transportation.
• Commercial invoice. A document written by the exporter to precisely
describe the goods and terms of sale (similar to a shipping invoice
used in domestic shipments).
Copyright © 2020 by The McGraw-Hill Companies, Inc. All
rights reserved.
Common Forms of International Logistics Documentation
• Insurance certificate. Explains what type of coverage is utilized (fire,
theft, water), the name of the insurer, and the exporter whose
property is being insured.
• Certificate of origin. Denotes the country in which the goods were
produced to assess tariffs and other government imposed restrictions
on trade.
Copyright © 2020 by The McGraw-Hill Companies, Inc. All
rights reserved.
Recycle
Remanu-
facture Repair Reuse
Raw
Material
Build
Parts
Assemble
Modules
Assemble
Product
Market
Channel
Primary
Customer
Forward Logistics
Reverse Logistics
Trash
Secondary
Customer
Forward and Reverse Logistics
Copyright © 2020 by The McGraw-Hill Companies, Inc. All
rights reserved.

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Ch10-Global Supply Chain - Cadena de Suministro.pdf

  • 1. Chapter Ten: Global Supply Chain Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
  • 2. Table 10.1 Rationale for Globalization Objective Rationale Increase revenue • Open up more markets • Expand beyond competitors • Obtain accessibility to markets that limit access without local operations Achieve economies of scale • Take advantage of production capacity Reduce direct cost • Take advantage of lower labor rates or real estate expense Advance technology • Reduce energy requirements by reducing distance or changing transportation mode • Take advantage of differences in production requirements • Obtain access to advanced technology that may not be available from current locations due to historical investments • Obtain access to specialized expertise or language skills Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
  • 3. Table 10.1 Rationale for Globalization Objective Rationale Reduce firm’s global tax liability • Obtain local or regional tax benefits related to property, inventory, or income • Obtain reductions in value-added-taxes due to localized production or other value added services (i.e., packaging inventory management, customization) Reduce market access uncertainty • Source product from location that involves less transportation uncertainty • Source product from location that involved fewer security constraints Enhance sustainability • Source products or other resources (including human resources) from locations that have ongoing availability of materials and expertise such as energy or trained workers Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
  • 4. Table 10-2 Estimated 2012 National Logistics Expenditures Country/Region Logistics as a Percent of Gross Domestic Product United States 8.5 Japan 11.0 Europe 12.9 India 12.9 Mexico 14.0 China 14.4 Asia 16.8 Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
  • 5. Generic International Strategies High movement toward global integration Global strategy Transnational strategy Low movement toward global integration No international strategy Multi-domestic strategy Low movement toward local responsiveness High movement toward local responsiveness Source: James Fitzsimmons and Mona Fitzsimmons, Service Management Operations, Strategy, and Information Technology, 7th ed. (New York: McGraw-Hill, 2011). P. 352. Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
  • 6. Differential Characteristics of Global Services Development Stages Service Focus Marketing Strategy Delivery Strategy Management Strategy Human Resource Development No international strategy Standard product for local market Single strategy focused on local market Direct to customer Single simple financials Operated by entrepreneur with limited specialization Multi-domestic strategy Domestic marketing and delivery Domestic customers Collaboration Transaction driven with integrated financials Management with “home country” focus Global strategy Local market customization Focused specific market areas which may cross international boundaries Subsidiaries with local presence Decentralized operations with local profit responsibility Limited top management with international experience Transnational strategy Global branding and integrated operations Global customers Worldwide flow of key resources Centralized planning in global sites International training and experience
  • 7. Factors and Considerations –No International • Advantages • Focused on local market • Minimum coordination efforts • Cross functional decisions made by small group of executive managers • Disadvantages • Growth limited to local markets • Not easy to respond to globally based customers • Not large enough to take advantage of economies of scale Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
  • 8. Factors and Considerations –Multi-domestic • Advantages • Focused on local market • Minimum coordination efforts • Allows firm to focus on key growth markets while minimizing complexity across a large number of markets. • Disadvantages • Not scalable • Not easy to respond to globally based customers Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
  • 9. Factors and Considerations – Global • Advantages • Focused on local market • Firm begins to take advantage of global brands and products • Can meet the unique needs of individual markets • Disadvantages • Not scalable • Not easy to respond to globally based customers • Limited synergies when working with global customers • Limited drivers for global data and processes Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
  • 10. Factors and Considerations – Transnational • Advantages • Global focus to facilitate global solution development and delivery • Very scalable to domestic and global firms • Disadvantages • Requires substantial coordination and information integration • Reduced ability to respond to market uniqueness Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
  • 11. Table 10-6 Comparison of Global Supply Chain Characteristics Region Infrastructure Technology Human Capital Political North America Built up but congested Access to new technology but infrastructure represents old technology High technical talent but high wages Stable laws and trade agreements Europe Built up but congested Access to new technology but infrastructure represents old technology High technical talent but high wages Stable laws and trade agreements South America Limited and congested Introduction of new technology Low technical talent and low wages Challenges due to legal environment and corruption Asia Limited and congested Introduction of new technology Increasing technical talent and wages Challenges due to legal environment and corruption Africa Minimal Introduction of new technology Low technical talent and low wages Challenges due to legal environment and corruption Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
  • 12. Mode of Entry Favorable Conditions Strengths Weaknesses Exporting and Importing • Limited or unclear sales potential in target countries • Standardized product requiring little product modification • Favorable import policies in target countries; unclear political stability • Minimizes involvement, commitment, and risk • Increases speed and flexibility of engaging target countries • Uses existing production facilities worldwide • Company and its products are viewed as outsiders and foreign market entrants • Costs associated with, for example, trade barriers, tariffs, and transportation Licensing and Franchising • Import and investment barriers exist in target countries but moderate sales potential exist • Large cultural distance between home and host countries • Licensee has limited ability to become a future competitor • Moderate involvement and commitment, and low risk • Moderate speed and flexibility of engaging target countries • Can circumvent import barriers; sales potential • Licensee period is limited in contractual length and licensee may become competitor • Lack of control over the use of company and non-company assets to promote products International Joint Ventures • Import barriers exist in target countries but government restrictions exist on foreign ownership • Moderate to high sales potential of products • Local JV partner can provide knowledge, skills, and network • Overcomes ownership restrictions and cultural distance • Potential for learning and resource combination • IJV ownership >50% are typically viewed as domestic companies • IJVs are new companies, legally independent from the original companies • IJVs are difficult to manage for the original companies and there is a lack of control over strategic and tactical issues Foreign Direct Ownership • Import barriers exist in target countries but low political risk • Small cultural distance between home and host countries • High sales potential of products but assets cannot be fairly prices • Viewed as being locally committed and involved • Gain knowledge, over time, of the local market • Can apply local skills to customize production • Higher risk being taken while being more committed and involved • Requires more human and non- human resources, and interaction and integration with local employees Table 10-7 Characteristics, Strengths, and Weaknesses by Entry Mode Source: Hult, Tomas, David Closs, David Frayer. Global Supply Chain Management: Leveraging Processes, Measurements, and Tools for Strategic Corporate Advantage. (New York: McGraw Hill, 2014). Pg. 205. Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
  • 13. Common Forms of International Logistics Documentation • Export irrevocable commercial letter of credit. A contract between and importer and a bank that transfers liability or paying the exporter from the importer to the (supposedly more creditworthy) importer’s bank. • Bank draft (or bill of exchange). A means of payment for an import/export transaction. Two types exist: transaction payable on sight with proper documents (sight draft) and transaction payable at some fixed time after acceptance of proper documents (time draft). Either type of draft accompanied by instructions and other documents (but no letter of credit) is a documentary draft. Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
  • 14. Common Forms of International Logistics Documentation • Bill of lading. Issued by the shipping company or its agent as evidence of a contract for shipping the merchandise and as a claim to ownership of the goods. • Combined Transport Document. May replace the bill of lading if goods are shipped by air (airway bill) or by more than one mode of transportation. • Commercial invoice. A document written by the exporter to precisely describe the goods and terms of sale (similar to a shipping invoice used in domestic shipments). Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
  • 15. Common Forms of International Logistics Documentation • Insurance certificate. Explains what type of coverage is utilized (fire, theft, water), the name of the insurer, and the exporter whose property is being insured. • Certificate of origin. Denotes the country in which the goods were produced to assess tariffs and other government imposed restrictions on trade. Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.
  • 16. Recycle Remanu- facture Repair Reuse Raw Material Build Parts Assemble Modules Assemble Product Market Channel Primary Customer Forward Logistics Reverse Logistics Trash Secondary Customer Forward and Reverse Logistics Copyright © 2020 by The McGraw-Hill Companies, Inc. All rights reserved.