Appunti di International management

Types of Countertrade

OFFSET - Similar to counterpurchase but the firm can buy from any firm in the country. More latitude to purchase goods of interest.

SWITCH TRADING - When a firm enters a counterpurchase or offset agreement with a country, it often ends up with what are called counterpurchase credits. Counterpurchase credits can be used to purchase goods from that country. A third-party trading house buys the firm's counterpurchase credits and sells them to another firm that can better use them.

BUYBACK - Occurs when a firm builds a plant or supplies technology, equipment, training, etc. to a country and agrees to take a certain percentage of the plant's output as partial payment for the contract.

PROS

• A way to finance an export deal when other means are not available
• May be the only option available when doing business in countries without the foreign exchange necessary to pay for imports
• Entering a countertrade agreement can help establish long-term relationships with foreign partners

CONS

• Businesses prefer cash
• Countertrade can be complex and time-consuming to negotiate and manage
• There is a risk of not receiving full value for the goods or services provided in a countertrade agreement

agreement may gain an‣ export opportunity at the expense of competitors unwilling to countertrade‣

STRATEGIC CONSIDERATIONS

many countries prefer countertrade to cash deals‣

• may be even required by the government

more attractive to diversified MN‣ 4 - 4 {chapter 17}

International Management : Global production and supply chain management

STRATEGY, PRODUCTION, AND SUPPLY CHAIN MANAGEMENT

PRODUCTION MANAGEMENT

- Is concerned with the creation of a good or service

- Production activities depend on timely supply of quality materials and info

SUPPLY CHAIN MANAGEMENT

- Is the integration and coordination of logistics, purchasing, operations, and market channel activities from raw material to the end-customer

Purchasing: worldwide buying of raw material, components and products‣

Logistics: planning and executing the flows and inventory of raw material, components, and products‣

- A proper management of production and of the supply chain

Lowers the costs of value creation‣

Adds value

By better serving customer needs

• Supply chain management
• UPSTREAM SUPPLY CHAIN (INBOUND) - Includes all of the organizations and resources that are involved in the portion of the supply chain from raw materials to the production facility
• DOWNSTREAM SUPPLY CHAIN (OUTBOUND) - Includes all of the organizations that are involved in the portion of the supply chain from the production facility to the end-customer
• Production, supply chain and value
• OBJECTIVE OF PRODUCTION, PURCHASING AND LOGISTICS
• Minimization of the cost for moving materials, components and products
• Maximizing efficiency by locating activities at optimal locations
• Managing the global supply chain to better match supply and demand
• Coordination and integration of the supply chain functions inside a MNEs and across suppliers and distributors
• Reduction of inventory
• Increased inventory turnover
• Easier transportation
• Production quality
• Increase product (or service) quality (i.e. reliability)

Establishing process-based quality standards

• Eliminating defective raw material, component parts, and products
• Improved production quality/reliability reduces production and after-sales costs
• Productivity increases if poor-quality products are not produced
• Costs from reworking are avoided
• Costs from warranty and fixing defective products are avoided

Accommodate demands for local responsiveness

1. Quick response to shifts in customers demands

MANAGING A GLOBAL SUPPLY CHAIN IN SATURATED MARKETS COST REDUCTION FROM SUPPLY CHAIN MANAGEMENT IMPACT-PROFITABILITY MORE THAN REVENUE GROWTH

• Managing a global supply chain means: just-in-time inventory
• Using information technology
• Coordination in global supply chains
• Inter-organizational relationships in global supply chains
• Global supply coordination-- Operational objectives

Responsiveness: ability to timely satisfy customers' requirements across global supply chain functions

• Inventory reduction: integrating inventory systems, controlling asset commitment, and turning velocity.
• Shipment consolidation: integrating programs to combine small shipments and provide timely, consolidated movement.
• Quality: integrating systems to achieve zero defects.
• Life-cycle: integrating the activities of reverse logistics, recycling, after-market service, product recall, and product disposal across global supply chain functions.

• Early identification of defective parts
• Early identification and fixing of supply problems
• Problem: no buffer stock in case of problems

relationshipUpstream‣ • Vendors• Suppliers• PartnersDownstream‣ • Buyers• Customers• Clients

GLOBAL SUPPLY CHAIN FUNCTIONS

Production

Location of choice- OPTIMAL PRODUCTION LOCATION-- Minimizes costs- Maximizes quality- Function of :

Country factors‣ Technological factors‣ Production factors‣

Country factors- COUNTRIES DIFFER IN TERMS OF-- Political and economic systems as well as cultureInfluence the benefits, costs and risks of doing business in a country‣ 2 - 6 {chapter 17}- Relative factor costsDetermine a country’s comparative advantage‣- Other factorsIndustrial districts and network effects‣ Formal and informal trade barriers‣ Movements of the currency exchange rate‣ Employees turnoveŕ‣ Employees productivitý‣

Technological factors- THE MANUFACTURING TECHNOLOGY INFLUENCE THE DEGREE AT WHICH PRODUCTION CAN BE-CENTRALIZED AT A SINGLE LOCATION- Level of fixed costsHigher fixed costs push for centralization‣ •

Centralization increase location risk (no country diversification)- Minimum efficient scale

The higher the MES, the more centralization is sensible‣- Flexibility and mass customization

Product standardization reduces costs, customization increases costs‣ Flexible (lean) manufacturing‣ • Allows mass customization (variety at low production costs), customization for small segment, adaptation to local preferences

Shorter equipment setup times✦ Increases the utilization of equipment (better scheduling)✦ Improves quality control✦Production factors

PRODUCTION FACTORS AFFECTING THE LOCATION OF MANUFACTURING-- Product features- Value to weight- Serving universal goods

CENTRALIZED PRODUCTION IS FAVORED BY-- Cross-country differences in factor costs and institutions strongly affect manufacturing costsi.e., some countries are clearly better than others for manufacturing↪︎- Trade barriers are low- Presence of industrial districts- Exchange rates are expected to remain stable-

High fixed costs and high minimum efficient scale- Flexible manufacturing technology exists- The product's value-to-weight ratio is high- The product serves universal needs

TYPES OF PRODUCTION SITES

• Offshore factories

Objective: lowering production costs by producing component parts or finished goods at low cost

• Minimal responsibilities (e.g., engineering, development, supplier relationships, price negotiation)

• Source factories

Objective: lowering production costs by producing component parts or finished goods at low cost

• Responsibilities: purchasing materials and components, production planning, process changes, logistics issues, product customization, and implementation of newer designs when needed

Status: top of the standards within the global supply chain

• Server factories

Objectives: supplying specific countries or regional markets around the globe, reducing or eliminating costly global supply chain operations that would

containerization of secondary packaging for easier handling or transfer

FUNCTIONS

• Moving: ability to handle transportation conveniently and to be stored

4 - 6 {chapter 17}