Unit – IV

PRODUCTION, MARKETING, FINANCIAL & HUMAN RESOURCE

MANAGEMENT OF GLOBAL BUSINESS

INTRODUCTION – GLOBAL PRODUCTION

Global production provides an unparalleled opportunity for companies to grow into new markets while at the same time boosting their competitiveness.

Reasons◦ Import restrictions◦ Raw materials◦ Inputs◦ Human resource◦ Labor laws◦ Logistics management◦ Export◦ Different consumers

Location of production

Meaning – location of productionIt determines the cost of marketing

and availability of the products to the international customers.

Meaning – production locationProduction location is concerned with

the establishment of manufacturing facility at a particular place or location

Factors behind the selection of a location

1.Size 8. Logistics

2. Raw Material 9. Economies of scale

3. Currency 10. Low – cost site

4. Political 11. Quality

5. Cultural 12. Subsidiaries

6. Market 13.Customers

7.labour

Global location decision

Country FactorsTechnology FactorsProduct FactorsGovernment PoliciesOrganizational IssuesBusiness Strategy IssuesInventory Management Policies

Scale of operations

The term scale of production refers to the quantity or numbers of a product made.

Its decisions will be influenced by the:Volume or quantities of products requiredTypes of materials used to make the

productsType of product being manufacturedInput factors:Land , labour, capital, resources, and

technology…

Scales of production

Continuous productionEX: FMCG productsBatch ProductionEX: Furniture, Auto AncillarySingle Item Production EX: Designers, Bicycle mfg

Cost of ProductionLabour CostsCapital costs and depreciationCost of materials

Make or buy

Make or buy decisions

The make or buy decisions is the act of making a strategic choice between producing an item internally (in house) or buying it externally (from an outside supplier).

The buy side of the decision also is referred to as outsourcing

Outsourcing

Advantages of Make or buy decision

Advantages Advantages

Lower cost Strategic flexibility

Facilitating Specialized Investments

Lower Costs

Proprietary Product Technology Protection

Offsets

Improved Scheduling Strategic Alliance with Suppliers

Global Supply Chain

It is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end users.

Issues in global supply chain

CostsExchange RateTimeWeather ConditionsCustomsSourcing PlanSupplier SelectionsAdditional considerations

Significance of MakingLower CostsFacilitating specialized

investmentsProprietary product technology

productionImproved scheduling

Significance of BuyingStrategic flexibilityLower costoffsets

Global supply chain management

Supply chain management deals with the total flow of material from supplier through the end user.

Global supply chain business process

Customer relationship management

Customer Service Management

Demand Management

Order fulfillment

Manufacturing Flow Management

procurement

Product Development and Commercialization

Returns Management

Quality considerations

Quality defined as meeting or exceeding the expectations of the customer.

It is the conformance to specifications, value, fitness for use, support and psychological impressions

Globalization of markets - Reasons

Mass ProductionRisk reductionIncrease ProfitsAdverse Conditions of home

countryTo cater the demand of the

foreign marketUnfulfilled needs of the customers

by the domestic companies

Marketing strategy

The International Marketing Strategies should depends on the company’sMarketing Orientation

◦ Production orientation◦ Sales orientation◦ Customer orientation◦ Strategic marketing orientation◦ Societal marketing orientation

Targeting and segmenting markets

Marketing orientations

There are 5 common orientationProduction orientationSales orientationCustomer OrientationStrategic Marketing orientationSocietal Marketing orientation

Target Markets

3 SegmentationsBy CountryBy Global SegmentBy Multiple Criteria

Product DevelopmentProduct development is the

process of finding out the possibility of producing a product.

It involves the adding, dropping, and modification of item specifications in the product line for a given period of time.

Factors contributing to product development

Changing customer preferencesTechnological changesInternational laws and Govt.

PoliciesProduct Life Cycle

Challenges in product development

Key Factors

Designing a Specific

Product

Platform Flexibility

Design for the Market Complexity Management

Variant Design Customer Involvement

Build Anywhere Outsourcing

Design Everywhere Product Development

Development Speed

Pricing StrategiesSkimming StrategyPenetration Pricing StrategyDifferential pricing StrategyGeographic pricing StrategyProduct line pricing Strategy

Pricing Strategies

Factors affecting International pricing StrategiesGovt InterventionsMarket DiversityExport price EscalationFixed vs Variable PricingRelations with Suppliers

Channel Management

It is one of 4P’s ‘Place’The term channel management has two

meanings 1. The Physical movement of goods from the

place of manufacture to a location in or close to points of purchase

2. A marketing channel can be seen as a concatenation of individuals and organizations involved in the process of making goods or services available for use or consumption

Investment decisionsCapital BudgetingCountry Risk AnalysisSources of fundsForeign Exchange Risk

Sources of FundsInternal Sources

◦Funds from the parent (Equity / Loans)

◦Funds provided by operations◦Loans from sister subsidiaries◦Global cash management◦Multilateral netting

External SourcesDebt financingVenture capitalEquity financingFactoringForfeitingEquipment leasing

Exchange rate risk

The risk that a business operations or an investment’s value will be affected by changes in exchange rates.

Foreign exchange risk is the level of uncertainty that a company must manage for changes in foreign exchange rates that will adversely affect the money the company receives for goods and services over a period of time.

Selection of expatriate managers

There are four dimensions that seem to success in a foreign posting:1. Self Orientation2. Others Orientation3. perceptual Ability4. Cultural Toughness

Selection of Expatriate managers

Identification of expatriate pool

Assessment of I.Q.

Determination of Learning styles

Determination of thinking styles

Determination of assignment task

Assessment of family characteristics

Development of Repatriation program

Selection of expatriate candidtes

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