Introduction to International Business

1
Introduction to International Business

• Discussion Section
• April 6, 2007
• Sanny Liao

2
Review of Chapter 16

• What do the TQM, Six Sigma method and the ISO
  9000 try to achieve?
• Quality control
• What factors should firms consider when deciding
  production locations?
• Country factors (economic, political and cultural
  conditions, industry concentration, exchange
  rate, etc.)
• Technological factors (fixed cost, minimum
  efficient scale, flexible manufacturing
  technology and mass customization)
• Product factors (value to weight ratio,
  universality)

3
Review of Chapter 16 Contd

• What are the advantages of make
• Lower costs, facilitate specialized investments,
  protect proprietary technology, better
  coordination
• Buy
• Input location flexibility, lower cost in some
  cases, benefit from trade agreements (e.g.
  offsets)
• Between strategic alliances with suppliers

4
Review of Chapter 16 Contd

• How to manage the global supply chain most
  efficiently and competitively?
• Just-in-time inventory (JIT)
• Internet and EDI systems

5
Case Competitive Advantage at Dell Inc.

• What are the advantages to Dell of having
  manufacturing sites located where they are? What
  are the potential disadvantages?
• Dells manufacturing sites are in Brazil, China,
  Malaysia, Ireland, and the U.S. Advantages of
  these locations are that some of them are low
  cost (Brazil, China, Malaysia and, relatively,
  Ireland), they have educated work forces that are
  highly productive, and they are near large
  regional markets. Potential disadvantages
  quality control, sensitivity to international
  shocks.

6
Case Dell, contd

• 2. Why does Dell purchase most of the components
  that go into its PC from independent suppliers,
  as opposed to making more itself?
• Dell outsources because it enables Dells
  business model to be successful. Dells
  comparative advantage is in pricing,
  customization and rapid order fulfillment, all
  advantages gained through supply chain management
  and logistics. By outsourcing, Dell does not
  carry risks connected to inventory such as
  obsolescence, Dell can maintain flexibility in
  its manufacturing, and Dell has lower
  coordination costs than if it were vertically
  integrated, producing its own parts. Outsourcing
  allows Dell to focus on what it does best.

7
Case Dell, contd

• 3. What are the consequences for Dells cost
  structure and profitability of replacing
  inventories with information?
• Since component cost account for 75 of revenues
  and the value of hardware depreciates extremely
  fast, by replacing inventory with information,
  Dell reduces its exposure to product
  depreciation. Dell further reduces its costs
  (hence profitability) by providing their key
  suppliers with a similar information system.

8
Case Dell, contd

• 7. What are the potential risks associated with
  Dells global supply chain strategy? How can
  these risks be mitigated?
• Transportation disruption, supplier problems,
  vulnerability to IT issues
• Supplier problems are the most dangerous because
  they are not shared by competitors. They can be
  mitigated through vertical integration.

9
Global Production Group Discussion

• You are Apple, Maytag, Toyota, and Sony. How
  will you coordinate your production activities
  for the iPhone, the Maytag Neptune Washer, the
  Prius, and the Sony Playstation Portable?
• Where should production be located and should
  they be concentrated or dispersed?
• What should be the long-term strategic role of
  foreign production sites? Should the firm abandon
  a foreign site if factor costs change, or is
  there value to maintaining an operation at a
  given location even if economic conditions
  change?
• Should the firm own foreign production or should
  production be outsourced?
• How should a globally-dispersed supply chain be
  managed?
• Should the firm manage the logistics or outsource
  their management?