[국제경영론] Global Production and Supply Chain Management

국제경영론 International Business

Chapter. Global Production and Supply Chain Management 

 

• firms as a value chain
• firms are essentially value chains composed of series of distinct value creation activities, including materials management, human resource, information system, and firm infrastructure
• value creation activities categorized

1. primary activity : production, marketing & delivering the product to buyers, and providing support & after-sale service to the buyers
2. support activity : help firm to add value
3. provide inputs that allow primary activities of production and marketing to occur (information system, communication within the firm, logistic, human resources,, )

• interrelated issues in global economy
  • where to locate production activities
  • what the long term strategic role of foreign production sites should be
  • whether to own or outsource foreign production activities
  • how to manage a globally dispersed supply chain and what the role of technology should be in the management of global logistics
  • whether to manage global logistics or outsource

Global production : manufacturing activities

생산 시설과 회사를 어디에 위치시킬지

• must consider : (1) country factors, (2) technological factors, (3) production factors
• locating production facility 2가지 전략 존재
  • concentrating
    • Companies choose one best location for manufacturing.
    • They make and ship their products to the world from this place.
    • This strategy can save money through large-scale production.
    • It also allows companies to control operations tightly.
    • The best location is often where costs are low and resources are nearby.
    • Factors like skills, transportation, and material access influence this choice
  • Decentralizing
    • Companies set up many factories in different regions or countries.
    • These factories are close to the big markets they serve.
    • Being near customers helps companies react quickly to their needs.
    • This strategy can cut down on shipping costs and delays.
    • It also helps reduce the risk of problems like political trouble.
    • Having factories spread out lets companies adjust products for each area's taste or rules.
• country factors : 경제, 정치, 문화, 상대비용적인 조건을 고려 → select most conducive to the performance of activity (stability, cost of input such as labor)
  • location externality : Presence of global concentrations of activities (특히, 숙련된 노동자의 능력이나 supporting industries can be key reasons for choosing location
  • Regulations affecting FDI and trade barriers : ex. expectations about future exchange rate changes
  • transportation cost
• technological factors
  • fixed cost : setting up a manufacturing plant are very high → serve the world market from a single location or from a very few locations
  • flexibility of technology : Flexible manufacturing technology → wide variety of end products
    • Mass customization implies → firm may be able to customize its product range to suit the needs of different customer groups without bearing a cost penalty→ So, firms can act like a local firm without bearing the costs of establishing local manufacturing facilities
    • → improve competitive position of firms by allowing the firm to customize products to meet the demands of small customer groups in different markets
  • Q. when does it make sense to concentrate production at a few choice locations?
    • Concentrated production : fixed costs high, minimum efficient scale of production high,flexible manufacturing technologies are available
    • Concentrated not!! : both fixed costs and minimum efficient scale of production are low, flexible manufacturing technologies are not available
• production factors : two product factors impact location decisions
  • product’s value-to-weight ratio
    • high: a single location and export it ↔ low (like a bottle of water) multiple locations across the world (close to the local market)
  • Whether the product serves universal needs→ The need for local responsiveness is reduced for products, which increases the attractiveness of concentrated manufacturing
  • (모두가 프로덕트를 같은 방식으로 이용한다면 → u dont need to change it market by market), (국가마다 ,사람마다 다른 방식 이용 → customization 필요)
• strategic roles for production facilities
  • MNEs used to established and managed foreign plants to benefit only from:
  • (1) tariff and trade concessions (2)cheap labor (3) capital subsidies (4) reduced logistics costs.
  • Today, MNEs use foreign factories not only to gain access to the usual incentives but also to:(3) create centers of expertise for the entire company (4) global learning!
  • (1) get closer to their customers and suppliers (2) attract skilled and talented employees
  • Foreign factories can have a number of roles or designations:
    1. Offshore factory: a factory that is developed and set up mainly for producing component parts or finished goods at a lower cost than producing them at home or in any other market
    2. Source factory: factory whose primary purpose is also to drive down costs in the global supply chain (expertise o)
    3. Server factory: factory that is linked into the global supply chain for a global firm to supply specific country or regional markets around the world
    4. Contributor factory: A factory that serves a specific country or world region
    5. Outpost factory: A factory that can be viewed as an intelligence–gathering unit
    6. Lead factory: A factory that is intended to create new processes, products, and technologies that can be used throughout the global firm in all parts of the world
  • Q. does strategic rationale for establishing a foreign production facility change?
    • The strategic role of foreign factories and the strategic advantage of a particular location can change overtime
    • factory initially established to make a standard product to serve a local market, or to take advantage of low-cost inputs, can evolve into a facility with advanced design capabilities
    • As governmental regulations change and/or countries upgrade their factors of production, the strategic advantage of a particular location can change
    • As the strategic role of a factory is upgraded and a firm develops centers of excellence in different locations worldwide, it supports the development of a transnational strategy
      • A focus of a transnational strategy is global learning:the idea that valuable knowledge does not reside just in a firm’s domestic operations, it may also be found in its foreign subsidiaries
      • Managers should promote the idea that factories are potential centers of excellence with strategic importance to the firm
  • Answer: yes (role of foreign factory change o )