Operations

Management
Chapter 2
Operations Strategy in
a Global Environment
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e
2008 Prentice Hall, Inc. 21
 Outline
Global Company Profile: Boeing
A Global View of Operations
Cultural and Ethical Issues
Developing Missions And Strategies
Mission
Strategy

2008 Prentice Hall, Inc. 22

 Outline Continued

Achieving Competitive Advantage

Through Operations
Competing On Differentiation
Competing On Cost
Competing On Response
Ten Strategic OM Decisions

2008 Prentice Hall, Inc. 23

 Outline Continued

Issues In Operations Strategy

Research
Preconditions
Dynamics

2008 Prentice Hall, Inc. 24

 Outline Continued

Strategy Development and

Implementation
Critical Success Factors and Core
Competencies
Build and Staff the Organization
Integrate OM with Other Activities

2008 Prentice Hall, Inc. 25

 Outline Continued

Global Operations Strategy

Options
International Strategy
Multidomestic Strategy
Global Strategy
Transnational Strategy

2008 Prentice Hall, Inc. 26

 Learning Objectives
When you complete this chapter you
should be able to:

1. Define mission and strategy

2. Identify and explain three strategic
approaches to competitive
advantage
3. Identify and define the 10 decisions
of operations management

2008 Prentice Hall, Inc. 27

 Learning Objectives
When you complete this chapter you
should be able to:

4. Identify five OM strategy insights

provided by PIMS research
5. Identify and explain four global
operations strategy options

2008 Prentice Hall, Inc. 28

 Global Strategies
Boeing sales and production are
worldwide
Benetton moves inventory to stores
around the world faster than its
competition by building flexibility into
design, production, and distribution
Sony purchases components from
suppliers in Thailand, Malaysia, and
around the world

2008 Prentice Hall, Inc. 29

 Global Strategies
Volvo considered a Swedish company
but it is controlled by an American
company, Ford. The current Volvo S40 is
built in Belgium and shares its platform
with the Mazda 3 built in Japan and the
Ford Focus built in Europe.
Haier A Chinese company, produces
compact refrigerators (it has one-third of
the US market) and wine cabinets (it has
half of the US market) in South Carolina

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 Some Multinational
Corporations
% Sales % Assets
Outside Outside
Home Home Home % Foreign
Company Country Country Country Workforce

Citicorp USA 34 46 NA
Colgate- USA 72 63 NA
Palmolive
Dow USA 60 50 NA
Chemical
Gillette USA 62 53 NA
Honda Japan 63 36 NA
IBM USA 57 47 51

2008 Prentice Hall, Inc. 2 11

 Some Multinational
Corporations
% Sales % Assets
Outside Outside
Home Home Home % Foreign
Company Country Country Country Workforce

ICI Britain 78 50 NA
Nestle Switzerland 98 95 97
Philips Netherlands 94 85 82
Electronics
Siemens Germany 51 NA 38
Unilever Britain & 95 70 64
Netherlands

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 Some Boeing Suppliers (787)
Firm Country Component
Latecoere France Passenger doors
Labinel France Wiring
Dassault France Design and
PLM software
Messier-Bugatti France Electric brakes
Thales France Electrical power
conversion system
and integrated
standby flight display
Messier-Dowty France Landing gear structure
Diehl Germany Interior lighting
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 Some Boeing Suppliers (787)
Firm Country Component
Cobham UK Fuel pumps and valves
Rolls-Royce UK Engines
Smiths Aerospace UK Central computer
system
BAE SYSTEMS UK Electronics
Alenia Aeronautics Italy Upper center
fuselage &
horizontal stabilizer
Toray Industries Japan Carbon fiber for
wing and tail units

2008 Prentice Hall, Inc. 2 14

 Some Boeing Suppliers (787)
Firm Country Component
Fuji Heavy Japan Center wing box
Industries
Kawasaki Heavy Japan Forward fuselage,
Industries fixed section of wing,
landing gear well
Teijin Seiki Japan Hydraulic actuators
Mitsubishi Heavy Japan Wing box
Industries
Chengdu Aircraft China Rudder
Group
Hafei Aviation China Parts
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 Some Boeing Suppliers (787)
Firm Country Component
Korean Aviation South Wingtips
Korea
Saab Sweden Cargo access doors

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 Reasons to Globalize

Reasons to Globalize
Tangible 1. Reduce costs (labor, taxes, tariffs, etc.)
Reasons 2. Improve supply chain
3. Provide better goods and services
4. Understand markets
Intangible 5. Learn to improve operations
Reasons 6. Attract and retain global talent

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 Reduce Costs
Foreign locations with lower wage
rates can lower direct and indirect
costs
Maquiladoras
World Trade Organization (WTO)
North American Free Trade
Agreement (NAFTA)
APEC, SEATO, MERCOSUR
European Union (EU)
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 Improve the Supply Chain
Locating facilities closer to
unique resources
Auto design to California
Athletic shoe production to China
Perfume manufacturing in France

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 Provide Better Goods
and Services
Objective and subjective
characteristics of goods and
services
On-time deliveries
Cultural variables
Improved customer service

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 Understand Markets
Interacting with foreign customers
and suppliers can lead to new
opportunities
Cell phone
design from
Europe
Cell phone
fads from
Japan
Extend the product life cycle

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 Learn to Improve Operations

Remain open to the free flow of

ideas
General Motors partnered with a
Japanese auto manufacturer to
learn
Equipment and layout have been
improved using Scandinavian
ergonomic competence

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 Attract and Retain Global
Talent
Offer better employment
opportunities
Better growth opportunities and
insulation against unemployment
Relocate unneeded personnel to
more prosperous locations
Incentives for people who like to
travel

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 Cultural and Ethical Issues
Cultures can be quite different
Attitudes can be quite different
towards
Punctuality Thievery
Lunch breaks Bribery
Environment Child labor
Intellectual
property
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 You May Wish To Consider
National literacy rate Work ethic
Rate of innovation Tax rates
Rate of technology Inflation
change Availability of raw
Number of skilled materials
workers Interest rates
Political stability Population
Product liability laws Number of miles of
Export restrictions highway
Variations in language Phone system

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 Match Product & Parent
Braun Household
Appliances 1. Volkswagen
Firestone Tires 2. Bridgestone
Godiva Chocolate 3. Campbell Soup
Haagen-Dazs Ice 4. Ford Motor Company
Cream 5. Gillette
Jaguar Autos 6. Nestl
MGM Movies 7. Pillsbury
Lamborghini Autos 8. Sony
Alpo Petfoods

2008 Prentice Hall, Inc. 2 26

 Match Product & Parent
Braun Household
Appliances 1. Volkswagen
Firestone Tires 2. Bridgestone
Godiva Chocolate 3. Campbell Soup
Haagen-Dazs Ice 4. Ford Motor Company
Cream 5. Gillette
Jaguar Autos 6. Nestl
MGM Movies 7. Pillsbury
Lamborghini Autos 8. Sony
Alpo Petfoods

2008 Prentice Hall, Inc. 2 27

 Match Product & Country
Braun Household
Appliances
Firestone Tires 1. Great Britain
Godiva Chocolate 2. Germany
Haagen-Daz Ice 3. Japan
Cream
4. United States
Jaguar Autos
5. Switzerland
MGM Movies
Lamborghini Autos
Alpo Pet Foods

2008 Prentice Hall, Inc. 2 28

 Match Product & Country
Braun Household
Appliances
Firestone Tires 1. Great Britain
Godiva Chocolate 2. Germany
Haagen-Daz Ice 3. Japan
Cream
4. United States
Jaguar Autos
5. Switzerland
MGM Movies
Lamborghini Autos
Alpo Pet Foods

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 Developing Missions and
Strategies

Mission statements tell an

organization where it is going

The Strategy tells the

organization how to get there

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 Mission

Mission - where are

you going?
Organizations
purpose for being
Answers What do
we provide society?
Provides boundaries
and focus

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 FedEx
FedEx is committed to our People-Service-Profit
philosophy. We will produce outstanding financial
returns by providing total reliable, competitively
superior, global air-ground transportation of high
priority goods and documents that require rapid,
time-certain delivery. Equally important, positive
control of each package will be maintained using real
time electronic tracking and tracing systems. A
complete record of each shipment and delivery will
be presented with our request for payment. We will
be helpful, courteous, and professional to each other
and the public. We will strive to have a completely
satisfied customer at the end of each transaction.
Figure 2.2
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 Merck
The mission of Merck is to provide
society with superior products and
services - innovations and solutions
that improve the quality of life and
satisfy customer needs - to provide
employees with meaningful work and
advancement opportunities and
investors with a superior rate of return

Figure 2.2
2008 Prentice Hall, Inc. 2 33
 Hard Rock Cafe

Our Mission: To spread the spirit of Rock n

Roll by delivering an exceptional
entertainment and dining experience. We
are committed to being an important,
contributing member of our community and
offering the Hard Rock family a fun, healthy,
and nurturing work environment while
ensuring our long-term success.

Figure 2.2
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 Arnold Palmer Hospital

Arnold Palmer Hospital is a healing

environment providing family-centered
care with compassion, comfort and
respect when it matters the most.

Figure 2.2
2008 Prentice Hall, Inc. 2 35
 Factors Affecting Mission
Philosophy
and Values

Profitability
Environment
and Growth
Mission

Customers Public Image

Benefit to
Society
2008 Prentice Hall, Inc. 2 36
 Sample Missions
Sample Company Mission
To manufacture and service an innovative, growing, and
profitable worldwide microwave communications business
that exceeds our customers expectations.

Sample Operations Management Mission

To produce products consistent with the companys mission

as the worldwide low-cost manufacturer.

Figure 2.3
2008 Prentice Hall, Inc. 2 37
 Sample Missions
Sample OM Department Missions
Product design To design and produce products and
services with outstanding quality and
inherent customer value.
Quality management To attain the exceptional value that is
consistent with our company mission and
marketing objectives by close attention to
design, procurement, production, and field
service operations

Process design To determine and design or produce the

production process and equipment that will
be compatible with low-cost product, high
quality, and good quality of work life at
economical cost.

Figure 2.3
2008 Prentice Hall, Inc. 2 38
 Sample Missions
Sample OM Department Missions
Location To locate, design, and build efficient and
economical facilities that will yield high
value to the company, its employees, and the
community.
Layout design To achieve, through skill, imagination, and
resourcefulness in layout and work methods,
production effectiveness and efficiency while
supporting a high quality of work life.

Human resources To provide a good quality of work life, with

well-designed, safe, rewarding jobs, stable
employment, and equitable pay, in exchange
for outstanding individual contribution from
employees at all levels.

Figure 2.3
2008 Prentice Hall, Inc. 2 39
 Sample Missions
Sample OM Department Missions
Supply chain To collaborate with suppliers to develop
management innovative products from stable, effective,
and efficient sources of supply.
Inventory To achieve low investment in inventory
consistent with high customer service levels
and high facility utilization.
Scheduling To achieve high levels of throughput and
timely customer delivery through effective
scheduling.
Maintenance To achieve high utilization of facilities and
equipment by effective preventive
maintenance and prompt repair of facilities
and equipment.
Figure 2.3
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 Strategic Process
Organizations
Mission

Functional
Area Missions

Finance/
Marketing Operations
Accounting

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 Strategy
Action plan to
achieve mission
Functional areas
have strategies
Strategies exploit
opportunities and
strengths, neutralize
threats, and avoid
weaknesses

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 Strategies for Competitive
Advantage

Differentiation better, or at least

different
Cost leadership cheaper
Response rapid response

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 Competing on
Differentiation
Uniqueness can go beyond both the
physical characteristics and service
attributes to encompass everything
that impacts customers perception of
value
Safeskin gloves leading edge products
Walt Disney Magic Kingdom
experience differentiation
Hard Rock Cafe dining experience
2008 Prentice Hall, Inc. 2 44
 Competing on Cost
Provide the maximum value as
perceived by customer. Does not
imply low quality.
Southwest Airlines secondary
airports, no frills service, efficient
utilization of equipment
Wal-Mart small overheads, shrinkage,
distribution costs
Franz Colruyt no bags, low light, no
music, doors on freezers
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 Competing on Response
Flexibility is matching market changes in
design innovation and volumes
Institutionalization at Hewlett-Packard
Reliability is meeting schedules
German machine industry
Timeliness is quickness
in design, production,
and delivery
Johnson Electric,
Bennigans, Motorola

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 OMs Contribution to Strategy
Operations Specific Competitive
Decisions Examples Strategy Used Advantage

Product FLEXIBILITY:
Sonys constant innovation
Quality of new products....Design
HPs ability to lead
the printer marketVolume
Process
Southwest Airlines No-frills service....LOW COST
Location
DELIVERY:
Pizza Huts 5-minute guarantee Differentiation
Layout at lunchtime.....Speed (Better)
Federal Expresss absolutely,
Human positively on time...Dependability
resource Response
QUALITY:
Motorolas HDTV converters.........Conformance (Faster)
Supply chain Motorolas pagers...Performance Cost
leadership
Caterpillars after-sale service (Cheaper)
Inventory on heavy equipment....AFTER-SALE SERVICE

Scheduling Fidelity Securitys broad

line of mutual funds.BROAD PRODUCT LINE
Maintenance Figure 2.4
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 10 Strategic OM Decisions

1. Goods and 6. Human resources

service design and job design
2. Quality 7. Supply chain
3. Process and management
capacity design
8. Inventory
4. Location
selection 9. Scheduling
5. Layout design 10. Maintenance

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 Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Goods and Product is usually Product is not
service tangible tangible
design
Quality Many objective Many subjective
standards standards
Process Customers not Customer may be
and involved directly involved
capacity Capacity must
design match demand
Table 2.1
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 Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Location Near raw Near customers
selection materials and
labor
Layout Production Enhances product
design efficiency and production
Human Technical skills, Interact with
resources consistent labor customers, labor
and job standards, output standards vary
design based wages
Table 2.1
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 Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Supply Relationship Important, but
chain critical to final may not be
product critical
Inventory Raw materials, Cannot be stored
work-in-process,
and finished
goods may be
held
Scheduling Level schedules Meet immediate
possible customer demand
Table 2.1
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 Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Maintenance Often preventive Often repair and
and takes place takes place at
at production site customers site

Table 2.1
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 Managing Global Service
Operations
Requires a different perspective on:

Capacity planning
Location planning
Facilities design and layout
Scheduling

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 Process Design
High Process-focused Mass Customization
JOB SHOPS Customization at high
(Print shop, emergency Volume
room, machine shop, (Dell Computers PC,
Variety of Products

fine-dining Repetitive (modular) cafeteria)

restaurant) focus
ASSEMBLY LINE
Moderate (Cars, appliances,
TVs, fast-food
restaurants) Product focused
CONTINUOUS
(steel, beer, paper,
bread, institutional
kitchen)
Low

Low Moderate High

Volume
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 Operations Strategies for
Two Drug Companies
Brand Name Drugs, Inc.
Competitive
Product Differentiation
Advantage
Product Heavy R&D investment;
Selection and extensive labs; focus on
Design development in a broad
range of drug
categories
Quality Major priority, exceed
regulatory requirements
Generic Drug Corp.
Low Cost
Low R&D investment;
focus on development
of generic drugs
Meets regulatory
requirements on a
country by country
basis

Table 2.2
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 Operations Strategies for
Two Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Product Differentiation Low Cost
Advantage
Process Product and modular Process focused;
process; long general processes; job
production runs in shop approach, short-
specialized facilities; run production; focus
build capacity ahead of on high utilization
demand
Location Still located in the city Recently moved to low-
where it was founded tax, low-labor-cost
environment

Table 2.2
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 Operations Strategies for
Two Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Product Differentiation Low Cost
Advantage
Scheduling Centralized production Many short-run
planning products complicate
scheduling

Layout Layout supports Layout supports

automated product- process-focused job
focused production shop practices

Table 2.2
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 Operations Strategies for
Two Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Product Differentiation Low Cost
Advantage
Human Hire the best; Very experienced top
Resources nationwide searches executives; other
personnel paid below
industry average

Supply Chain Long-term supplier Tends to purchase

relationships competitively to find
bargains

Table 2.2
2008 Prentice Hall, Inc. 2 58
 Operations Strategies for
Two Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Product Differentiation Low Cost
Advantage
Inventory High finished goods Process focus drives up
inventory to ensure all work-in-process
demands are met inventory; finished
goods inventory tends
to be low
Maintenance Highly trained staff; Highly trained staff to
extensive parts meet changing demand
inventory

Table 2.2
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 Issues In Operations Strategy

Research about effective

operations management
strategies
Preconditions for developing
effective OM strategies
The dynamics of OM strategy
development

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 Characteristics of
High ROI Firms
High product quality
High capacity utilization
High operating efficiency
Low investment intensity
Low direct cost per unit

From the PIMS program of the Strategic Planning Institute

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 Strategic Options to Gain a
Competitive Advantage
28% - Operations Management
18% - Marketing/distribution
17% - Momentum/name recognition
16% - Quality/service
14% - Good management
4% - Financial resources
3% - Other
2008 Prentice Hall, Inc. 2 62
 Elements of Operations
Management Strategy
Low-cost product
Product-line breadth
Technical superiority
Product characteristics/differentiation
Continuing product innovation
Low-price/high-value offerings
Efficient, flexible operations adaptable to
consumers
Engineering research development
Location
Scheduling
2008 Prentice Hall, Inc. 2 63
 Preconditions
One must understand:
Strengths and weaknesses of competitors and
possible new entrants into the market
Current and prospective environmental,
technological, legal, and economic issues
The product life cycle
Resources available within the firm and within
the OM function
Integration of OM strategy with companys
strategy and with other functional areas

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 Dynamics of
Strategic Change
Changes within the organization
Personnel
Finance
Technology
Product life
Changes in the environment

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 Product Life Cycle
Introduction Growth Maturity Decline
Best period to Practical to change Poor time to Cost control
Company Strategy/Issues

increase market price or quality change image, critical

share image price, or quality

R&D engineering is Strengthen niche Competitive costs

critical become critical
Defend market
position
CD-ROMs
Internet search engines
Analog TVs
Drive-through
LCD & plasma TVs restaurants

Sales iPods

3 1/2
Xbox 360 Floppy
disks

Figure 2.5
2008 Prentice Hall, Inc. 2 66
 Product Life Cycle
Introduction Growth Maturity Decline
Product design Forecasting Standardization Little product
and critical Less rapid differentiation
development Product and product changes Cost
OM Strategy/Issues

critical process more minor minimization

Frequent reliability changes Overcapacity
product and Competitive Optimum in the
process design product capacity industry
changes improvements Increasing Prune line to
Short production and options stability of eliminate
runs Increase capacity process items not
High production Shift toward Long production returning
costs product focus runs good margin
Limited models Enhance Product Reduce
Attention to distribution improvement capacity
quality and cost cutting

Figure 2.5
2008 Prentice Hall, Inc. 2 67
 SWOT Analysis

Mission

Internal External
Strengths Opportunities
Analysis

Internal External
Weaknesses Threats
Strategy

2008 Prentice Hall, Inc. 2 68

 Strategy Development Process

Environmental Analysis
Identify the strengths, weaknesses, opportunities, and threats.
Understand the environment, customers, industry, and competitors.

Determine Corporate Mission

State the reason for the firms existence and identify the
value it wishes to create.

Form a Strategy
Build a competitive advantage, such as low price, design, or
volume flexibility, quality, quick delivery, dependability, after-
sale service, broad product lines.

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 Strategy Development and
Implementation

Identify critical success factors

Build and staff the organization
Integrate OM with other activities

The operations managers job is to implement

an OM strategy, provide competitive
advantage, and increase productivity

2008 Prentice Hall, Inc. 2 70

 Critical Success Factors
Marketing Finance/Accounting Production/Operations
Service Leverage
Distribution Cost of capital
Promotion Working capital
Channels of distribution Receivables
Product positioning Payables
(image, functions) Financial control
Lines of credit

Decisions Sample Options Chapter

Product Customized, or standardized 5
Quality Define customer expectations and how to achieve them 6, S6
Process Facility size, technology, capacity 7, S7
Location Near supplier or near customer 8
Layout Work cells or assembly line 9
Human resource Specialized or enriched jobs 10, S10
Supply chain Single or multiple suppliers 11, S11
Inventory When to reorder, how much to keep on hand 12, 14, 16
Schedule Stable or fluctuating production rate 13, 15
Maintenance Repair as required or preventive maintenance 17

Figure 2.7
2008 Prentice Hall, Inc. 2 71
 Activity Mapping
Courteous, but
Limited Passenger
Service

Lean, Short Haul, Point-to-

Productive Point Routes, Often to
Employees Secondary Airports

Competitive Advantage:
Low Cost
High Frequent,
Aircraft Reliable
Utilization Standardized Schedules
Fleet of Boeing
737 Aircraft
Figure 2.8
2008 Prentice Hall, Inc. 2 72
 Activity Mapping
Courteous, but
Limited Passenger
Service

Lean, Short Haul, Point-to-

Productive Point Routes, Often to
Employees Secondary Airports
Automated ticketing machines
Competitive Advantage:
No seat assignments
Low Cost
No baggage transfers
High Frequent,
Aircraft No meals (peanuts) Reliable
Utilization Standardized Schedules
Fleet of Boeing
737 Aircraft
Figure 2.8
2008 Prentice Hall, Inc. 2 73
 Activity Mapping
Courteous, but
Limited Passenger
Service
No meals (peanuts)
Lean,
Lower gate costs at Short Haul, Point-to-
Productive Point Routes, Often to
secondary airports
Employees Secondary Airports
High number of flights
Competitive Advantage:
reduces employee idleCost
Low time
between flights
High Frequent,
Aircraft Reliable
Utilization Standardized Schedules
Fleet of Boeing
737 Aircraft
Figure 2.8
2008 Prentice Hall, Inc. 2 74
 Activity Mapping
Courteous,
High number but
of flights
Limited Passenger
reduces employee idle time
Service
between flights
Lean,
Saturate a city with flights, Short Haul, Point-to-
Productive Point Routes, Often to
lowering administrative
Employees Secondary Airports
costs (advertising, HR, etc.)
Competitive
per passenger Advantage:
for that city
Low Cost
Pilot training required on
Highonly one type of aircraft Frequent,
Aircraft Reliable
Reduced maintenance
Utilization Schedules
Standardized
inventory required because
Fleet of Boeing
of only one type ofAircraft
737 aircraft
Figure 2.8
2008 Prentice Hall, Inc. 2 75
 Activity Mapping
Pilot training required on
Courteous,
onlyLimited
one type butaircraft
of
Passenger
Reduced Service
maintenance
Lean,
inventory required because Short Haul, Point-to-
Productive of only one type of aircraft
Point Routes, Often to
Employees Secondary Airports
Excellent supplier relations
with Boeing
Competitive has aided
Advantage:
financing
Low Cost
High Frequent,
Aircraft Reliable
Utilization Standardized Schedules
Fleet of Boeing
737 Aircraft
Figure 2.8
2008 Prentice Hall, Inc. 2 76
 Activity Mapping
Courteous, but
Limited Passenger
Reduced maintenance
Service
inventory required because
Lean, of only one type of aircraft
Short Haul, Point-to-
Productive Point Routes, Often to
Flexible union
Employees Flexible employeesSecondary
and Airports
contracts standard planes aid
Competitive Advantage:
scheduling
Low Cost
Maintenance personnel
High trained only one type of
Frequent,
Aircraft aircraft Reliable
Utilization Standardized Schedules
20-minute gate turnarounds
Fleet of Boeing
737 Aircraft
Figure 2.8
2008 Prentice Hall, Inc. 2 77
 Activity Mapping
Automated ticketing
Courteous, but
machines
Limited Passenger
Service
Empowered employees
Lean, High employee
Short Haul, Point-to-
Productive Point Routes, Often to
compensation
Employees Secondary Airports
Hire for attitude, then train
Competitive Advantage:
LowHigh level of stock
Cost
ownership
High High number of flightsFrequent,
Aircraft Reliable
Utilization reduces employee idle time
Schedules
Standardized
Fleetbetween
of Boeing flights
737 Aircraft
Figure 2.8
2008 Prentice Hall, Inc. 2 78
 Four International
Operations Strategies
International
High
Strategy
Import/export or
Cost Reduction Considerations

license existing
product
Examples
U.S. Steel
Harley Davidson

Low
Low High
Local Responsiveness Considerations
2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 79
 Four International
Operations Strategies
High
Cost Reduction Considerations

International Strategy
Import/export or
license existing
product

Examples
U.S. Steel
Harley Davidson

Low
Low High
Local Responsiveness Considerations
2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 80
 Four International
Operations Strategies
Global
High Strategy
Standardized
Cost Reduction Considerations

product
Economies of scale
Cross-cultural
learning
Examples
International Strategy
Import/export or
Texas Instruments
license existing
product

Examples Caterpillar
Otis Elevator
U.S. Steel
Harley Davidson

Low
Low High
Local Responsiveness Considerations
2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 81
 Four International
Operations Strategies
High
Global Strategy
Standardized product
Cost Reduction Considerations

Economies of scale
Cross-cultural learning

Examples
Texas Instruments
Caterpillar
Otis Elevator

International Strategy
Import/export or
license existing
product

Examples
U.S. Steel
Harley Davidson

Low
Low High
Local Responsiveness Considerations
2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 82
 Four International
Multidomestic
Operations Strategies
Strategy
High
Use existing
Global Strategy
Standardizeddomestic model
Cost Reduction Considerations

product
Economies of scale
globally
Cross-cultural learning

Texas
Examples
Franchise, joint
Instruments
Caterpillar
Otis Elevatorventures,

subsidiaries
International Strategy
Examples
Import/export or
license existing
product Heinz
Examples McDonalds
U.S. Steel
The Body Shop
Harley Davidson

Low Hard Rock Cafe

Low High
Local Responsiveness Considerations
2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 83
 Four International
Operations Strategies
High
Global Strategy
Standardized product
Cost Reduction Considerations

Economies of scale
Cross-cultural learning

Examples
Texas Instruments
Caterpillar
Otis Elevator

International Strategy Multidomestic Strategy

Use existing
Import/export or domestic model globally
license existing Franchise, joint ventures,
product subsidiaries
Examples Examples
U.S. Steel Heinz The Body Shop
Harley Davidson McDonalds Hard Rock Cafe

Low
Low High
Local Responsiveness Considerations
2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 84
 Four International
Operations Strategies
Transnational
High Strategy
Move material,
Global Strategy
Standardized product
Cost Reduction Considerations

people, ideas
Economies of scale
Cross-cultural learning

Examples across national

Texas Instruments
Caterpillar boundaries
Otis Elevator
Economies of scale
Cross-cultural
International Strategy Multidomestic Strategy
learning
Import/export or
Use existing
domestic model globally
license existing Franchise, joint ventures,
product subsidiaries
Examples
Examples Examples
Coca-Cola
U.S. Steel
Harley Davidson
Heinz The Body Shop
McDonalds Hard Rock Cafe

Low Nestl
Low High
Local Responsiveness Considerations
2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 85
 Four International
Operations Strategies
High
Global Strategy Transnational Strategy
Standardized product Move material, people, ideas
Cost Reduction Considerations

Economies of scale across national boundaries

Cross-cultural learning Economies of scale
Cross-cultural learning
Examples
Texas Instruments Examples
Caterpillar Coca-Cola
Otis Elevator Nestl

International Strategy Multidomestic Strategy

Use existing
Import/export or domestic model globally
license existing Franchise, joint ventures,
product subsidiaries
Examples Examples
U.S. Steel Heinz The Body Shop
Harley Davidson McDonalds Hard Rock Cafe

Low
Low High
Local Responsiveness Considerations
2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 86
 Ranking Corruption
Rank Country 2006 CPI Score (out of 10)
1 Finland 9.6 Least
1 Iceland 9.6 Corrupt
1 New Zealand 9.6
5 Singapore 9.4
7 Switzerland 9.1
11 UK 8.6
14 Canada 8.5
15 Hong Kong 8.3
16 Germany 8.0
17 Japan 7.6
20 USA, Belgium 7.3
34 Israel, Taiwan 5.9
70 Brazil, China, Mexico 3.3 Most
121 Russia 2.5 Corrupt
Table 8.2
2008 Prentice Hall, Inc. 2 87