Operations

Management
Chapter 2 –
Operations Strategy in a
Global Environment
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 6e
Operations Management, 8e

© 2006
© 2006 Prentice
Prentice Hall, Inc. Hall, Inc. 2–1
 Outline
 Global Company Profile: Boeing
 A Global View of Operations
 Cultural and Ethical Issues
 Developing Missions And
Strategies
 Mission
 Strategy

© 2006 Prentice Hall, Inc. 2–2

 Outline – Continued

 Achieving Competitive Advantage

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

© 2006 Prentice Hall, Inc. 2–3

 Outline – Continued
 Issues In Operations Strategy
 Research
 Preconditions
 Dynamics
 Strategy Development And
Implementation
 Identify Critical Success Factors
 Build and Staff the Organization
 Integrate OM with Other Activities
© 2006 Prentice Hall, Inc. 2–4
 Outline – Continued
 Global Operations Strategy
Options
 International Strategy
 Multidomestic Strategy
 Global Strategy
 Transnational Strategy

© 2006 Prentice Hall, Inc. 2–5

 Learning Objectives
When you complete this chapter, you
should be able to:
Identify or Define:

 Mission
 Strategy
 Ten decisions of OM
 Multinational corporation

© 2006 Prentice Hall, Inc. 2–6

 Learning Objectives
When you complete this chapter, you
should be able to:
Describe or Explain:
 Specific approaches used by OM
to achieve strategies
 Differentiation
 Low cost
 Response
© 2006 Prentice Hall, Inc. 2–7
 Learning Objectives
When you complete this chapter, you
should be able to:
Describe or Explain:
 Four global operations strategies
 Why global issues are important

© 2006 Prentice Hall, Inc. 2–8

 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

© 2006 Prentice Hall, Inc. 2–9

 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

© 2006 Prentice Hall, Inc. 2 – 10

 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

© 2006 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

© 2006 Prentice Hall, Inc. 2 – 12

 Boeing Suppliers (787)
Firm Country Component
Dassault France Design and
PLM software
Messier-Bugatti France Landing gear
Thales France Electrical power
conversion system
and integrated
standby flight display
Diehl Germany Interior lighting
FR-HiTemp UK Fuel pumps
and valves
Smiths Aerospace UK Central computer
system
© 2006 Prentice Hall, Inc. 2 – 13
 Boeing Suppliers (787)
Firm Country Component
BAE SYSTEMS UK Electronics
Alenia Aeronautics Italy Upper center
fuselage &
horizontal stabilizer
Toray Industries Japan Carbon fiber for
wing and tail units
Fuji Heavy Japan Center wing box
Industries
Kawasaki Heavy Japan Forward fuselage,
Industries fixed section of wing,
landing gear well

© 2006 Prentice Hall, Inc. 2 – 14

 Boeing Suppliers (787)
Firm Country Component
Teijin Seiki Japan Hydraulic actuators
Mitsubishi Heavy Japan Wing box
Industries
Chengdu Aircraft China Rudder
Group
Hafei Aviation China Parts

© 2006 Prentice Hall, Inc. 2 – 15

 Reasons to Globalize

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

Figure 2.1
© 2006 Prentice Hall, Inc. 2 – 16
 Reduce Costs
 Foreign locations with lower wage
rates can lower direct and indirect
costs
 Maquiladoras
 World Trade Organization (WTC)
 North American Free Trade
Agreement (NAFTA)
 APEC, SEATO, MERCOSUR
 European Union (EU)
© 2006 Prentice Hall, Inc. 2 – 17
 Improve the Supply Chain
 Locating facilities closer to
unique resources
 Auto design to California
 Athletic shoe production to China
 Perfume manufacturing in France

© 2006 Prentice Hall, Inc. 2 – 18

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

© 2006 Prentice Hall, Inc. 2 – 19

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

© 2006 Prentice Hall, Inc. 2 – 20

 Learn to Improve Operations

 Remain open to the free flow of

ideas
 General Motors partnered with a
Japanese auto manufacturer to
learn
 Scandinavian design ideas have
been used to improve equipment
design and layout

© 2006 Prentice Hall, Inc. 2 – 21

 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

© 2006 Prentice Hall, Inc. 2 – 22

 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
© 2006 Prentice Hall, Inc. 2 – 23
 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

© 2006 Prentice Hall, Inc. 2 – 24

 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. Nestlé
 MGM Movies
7. Pillsbury
 Lamborghini Autos
8. Sony
 Alpo Petfoods

© 2006 Prentice Hall, Inc. 2 – 25

 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. Nestlé
 MGM Movies
7. Pillsbury
 Lamborghini Autos
8. Sony
 Alpo Petfoods

© 2006 Prentice Hall, Inc. 2 – 26

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

© 2006 Prentice Hall, Inc. 2 – 27

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

© 2006 Prentice Hall, Inc. 2 – 28

 Developing Missions and
Strategies

Mission statements tell an

organization where it is going

The Strategy tells the

organization how to get there

© 2006 Prentice Hall, Inc. 2 – 29

 Mission
 Mission - where are
you going?
 Organization’s
purpose for being
 Answers ‘What do
we provide society?’
 Provides boundaries
and focus

© 2006 Prentice Hall, Inc. 2 – 30

 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
© 2006 Prentice Hall, Inc. 2 – 31
 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
© 2006 Prentice Hall, Inc. 2 – 32
 Hard Rock Café

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
© 2006 Prentice Hall, Inc. 2 – 33
 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
© 2006 Prentice Hall, Inc. 2 – 34
 Factors Affecting Mission
Philosophy
and Values

Profitability
Environment
and Growth
Mission

Customers Public Image

Benefit to
Society
© 2006 Prentice Hall, Inc. 2 – 35
 Strategic Process
Organization’s
Mission

Functional
Area Missions

Finance/
Marketing Operations
Accounting

© 2006 Prentice Hall, Inc. 2 – 36

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

© 2006 Prentice Hall, Inc. 2 – 37

 Strategies for Competitive
Advantage

 Differentiation – better, or at least

different
 Cost leadership – cheaper
 Quick response – more
responsive

© 2006 Prentice Hall, Inc. 2 – 38

 Competing on
Differentiation
Uniqueness can go beyond both the
physical characteristics and service
attributes to encompass everything
that impacts customer’s perception of
value
 Safeskin gloves – leading edge products
 Walt Disney Magic Kingdom –
experience differentiation
 Hard Rock Cafe – theme experience
© 2006 Prentice Hall, Inc. 2 – 39
 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
© 2006 Prentice Hall, Inc. 2 – 40
 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, Bennigan’s, Motorola

© 2006 Prentice Hall, Inc. 2 – 41

 OM’s Contribution to Strategy
Operations Specific Competitive
Decisions Examples Strategy Used Advantage

Product FLEXIBILITY
Sony’s constant innovation
Quality of new products………………………………....Design
HP’s ability to follow
the printer market………………………………Volume
Process
Southwest Airlines No-frills service……..…..LOW COST
Location
DELIVERY
Pizza Hut’s five-minute Differentiation
Layout guarantee at lunchtime…………………..…..……..Speed (Better)
Federal Express’s “absolutely,
positively on time”………………………..….Dependability
Human
resource QUALITY Response
Motorola’s automotive products (Faster)
ignition systems…………………………......Conformance Cost
Supply-chain
Motorola’s pagers………………………..….Performance leadership
(Cheaper)
Inventory IBM’s after-sale service
on mainframe computers……....AFTER-SALE SERVICE
Scheduling Fidelity Security’s broad
line of mutual funds………….BROAD PRODUCT LINE
Maintenance Figure 2.4
© 2006 Prentice Hall, Inc. 2 – 42
 10 Strategic OM Decisions

 Goods and service  Human resource

design and job design
 Quality  Supply-chain
 Process and management
capacity design  Inventory
 Location selection  Scheduling
 Layout design  Maintenance

© 2006 Prentice Hall, Inc. 2 – 43

 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
© 2006 Prentice Hall, Inc. 2 – 44
 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 constant labor customers, labor
and job standards, output standards vary
design based wages
Table 2.1
© 2006 Prentice Hall, Inc. 2 – 45
 Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Supply- Relationship Important, but
chain mgmt 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
© 2006 Prentice Hall, Inc. 2 – 46
 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 customer’s site

Table 2.1
© 2006 Prentice Hall, Inc. 2 – 47
 Process Design
High Process-focused Mass Customization
JOB SHOPS Customization at high
(Print shop, emergency Volume
room, machine shop, (Dell Computer’s PC)
Variety of Products

fine dining Repetitive (modular)

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

Low

Low Moderate High

Volume
© 2006 Prentice Hall, Inc. 2 – 48
 Operations Strategies for
Two Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Product Differentiation Low Cost
Advantage
Product Heavy R&D; labs; focus Low R&D; focus on
Selection and on development in a development of generic
Design broad range of drug drugs
categories

Quality Major priority, exceed Meets regulatory

regulatory requirements requirements on a
country by country
basis

Table 2.2
© 2006 Prentice Hall, Inc. 2 – 49
 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; production runs; 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
© 2006 Prentice Hall, Inc. 2 – 50
 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
© 2006 Prentice Hall, Inc. 2 – 51
 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
© 2006 Prentice Hall, Inc. 2 – 52
 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
© 2006 Prentice Hall, Inc. 2 – 53
 Managing Global Service
Operations
Probably requires a different
perspective on:
 Capacity planning
 Location planning
 Facilities design and layout
 Scheduling

© 2006 Prentice Hall, Inc. 2 – 54

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

From the PIMS program of the Strategic Planning Institute

© 2006 Prentice Hall, Inc. 2 – 55

 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
© 2006 Prentice Hall, Inc. 2 – 56
 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
© 2006 Prentice Hall, Inc. 2 – 57
 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 company’s
strategy and with other functional areas

© 2006 Prentice Hall, Inc. 2 – 58

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

© 2006 Prentice Hall, Inc. 2 – 59

 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-ROM Fax machines

Internet Drive-through
restaurants
Color printers
Sales
3 1/2”
Floppy
Flat-screen disks
monitors DVD

Figure 2.5
© 2006 Prentice Hall, Inc. 2 – 60
 Product Life Cycle
Introduction Growth Maturity Decline
Product design Forecasting Standardization Little product
and critical differentiation
Less rapid
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 returning
Shift toward Long production
costs product focus runs good margin
Limited models Reduce
Enhance Product
capacity
Attention to distribution improvement and
quality cost cutting

Figure 2.5
© 2006 Prentice Hall, Inc. 2 – 61
 Strategy Development and
Implementation
 Identify critical success factors
 Build and staff the organization
 Integrate OM with other activities

The operations manager’s job is to implement

an OM strategy, provide competitive
advantage, and increase productivity

© 2006 Prentice Hall, Inc. 2 – 62

 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 firm’s 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.

© 2006 Prentice Hall, Inc. Figure 2.6 2 – 63

 SWOT Analysis

Mission

Internal External
Strengths Opportunities
Analysis

Internal External
Weaknesses Threats
Strategy

© 2006 Prentice Hall, Inc. 2 – 64

 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
© 2006 Prentice Hall, Inc. 2 – 65
 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
© 2006 Prentice Hall, Inc. 2 – 66
 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
© 2006 Prentice Hall, Inc. 2 – 67
 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 idle time
Low Cost
between flights
High Frequent,
Aircraft Reliable
Utilization Standardized Schedules
Fleet of Boeing
737 Aircraft
Figure 2.8
© 2006 Prentice Hall, Inc. 2 – 68
 Activity Mapping
High number of flights
Courteous, but
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
© 2006 Prentice Hall, Inc. 2 – 69
 Activity Mapping
Pilot training required on
Courteous,
onlyLimited
one type butaircraft
of
Passenger
ReducedService
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
© 2006 Prentice Hall, Inc. 2 – 70
 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
© 2006 Prentice Hall, Inc. 2 – 71
 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
Aircraft High number of flightsFrequent,
Reliable
Utilization reduces employee idle time
Standardized Schedules
Fleetbetween
of Boeing flights
737 Aircraft
Figure 2.8
© 2006 Prentice Hall, Inc. 2 – 72
 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
© 2006 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 73
 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
© 2006 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 74
 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
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 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
© 2006 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 76
 FourMultidomestic
International
Operations Strategies
Strategy
High
 Use existing
Global Strategy
 Standardizeddomestic
product model
Cost Reduction Considerations

 Economies of scale
globally
 Cross-cultural learning

Examples
 Franchise, joint
Texas Instruments
Caterpillar
Otis Elevatorventures,

subsidiaries
International Strategy
Examples
 Import/export or

Heinz
license existing
product

Examples
McDonald’s
U.S. Steel
The Body Shop
Harley Davidson

Low Hard Rock Cafe

Low High
Local Responsiveness Considerations
© 2006 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 77
 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 McDonald’s Hard Rock Cafe

Low
Low High
Local Responsiveness Considerations
© 2006 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 78
 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
McDonald’s Hard Rock Cafe

Low Nestlé
Low High
Local Responsiveness Considerations
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(Quick Response and/or Differentiation) 2 – 79
 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 Nestlé

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 McDonald’s Hard Rock Cafe

Low
Low High
Local Responsiveness Considerations
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(Quick Response and/or Differentiation) 2 – 80
 Ranking Corruption
Rank Country 2004 CPI Score (out of 10)
1 Finland 9.7 Good
2 New Zealand 9.6
5 Singapore 9.3
7 Switzerland 9.1
9 Australia 8.8
11 United Kingdom 8.6
12 Canada 8.5
15 Germany 8.2
16 Hong Kong 8.0
17 Ireland 7.5
17 USA 7.5
24 Japan 6.9
35 Taiwan 5.6
64 Mexico 3.6 Not So
71 China 3.4 Good
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